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IC 9070 



Bureau of Mines Information Circular/1986 



GOLD AVAILABILITY- 
WORLD 

A Minerals Availability Appraisal 

By Paul R. Thomas and Edward H. Boyle, Jr. 




UNITED STATES DEPARTMENT OF THE INTERIOR 



Information Circular 9070 

GOLD AVAILABILITY- 
WORLD 

A Minerals Availability Appraisal 

By Paul R. Thomas and Edward H. Boyle, Jr. 




UNITED STATES DEPARTMENT OF THE INTERIOR 
Donald Paul Hodel, Secretary 

BUREAU OF MINES 
Robert C. Horton, Director 



As the Nation's principal conservation agency, the Department of the Interior has 
responsibility for most of our nationally owned public lands and natural resources. This 
includes fostering the wisest use of our land and water resources, protecting our fish 
and wildlife, preserving the environment and cultural values of our national parks and 
historical places, and providing for the enjoyment of life through outdoor recreation. 
The Department assesses our energy and mineral resources and works to assure that 
their development is in the best interests of all our people. The Department also has 
a major responsibility for American Indian reservation communities and for people who 
live in island territories under U.S. administration. 



to 



n 



i, oilffi 




Library of Congress Cataloging-in-Publication Data 



Thomas, Paul R. 

Gold availability— world. 

(Information circular) 

Bibliography: p. 85 

Supt. of Docs, no.: I 28.27: 

1. Gold. I. Boyle, Edward H. II. Title. III. Series: Information circular (United States. 
Bureau of Mines); 



622 s [553.41] 



85-600217 



For sale by the Superintendent of Documents, U.S. Government Printing Office 
Washington, DC 20402 



Ill 



PREFACE 

The Bureau of Mines is assessing the worldwide availability of selected minerals 
of economic significance, most of which are also critical minerals. The Bureau iden- 
tifies, collects, compiles, and evaluates information on producing, developing, and ex- 
plored deposits, and mineral processing plants worldwide. Objectives are to classify both 
domestic and foreign resources, to identify by cost evaluation those demonstrated 
resources that are reserves, and to prepare analyses of mineral availability. 

This report is one of a continuing series of reports that analyze the availability of 
minerals from domestic and foreign sources. Questions about the Minerals Availabil- 
ltv Program should be addressed to Chief, Division of Minerals Availability, Bureau 
of Mines, 2401 E Street NW., Washington, DC 20241. 



CONTENTS 



Page 



Page 



Abstract 1 

Introduction 2 

Acknowledgments 2 

Commodity overview 2 

Historical perspective on production through 

1983 6 

Resource overview. 1984 7 

Total primary gold availability and production 

cost evaluation 8 

Comparative production costs in major 

producing countries 8 

Potential annual production through 2000 .... 11 

Republic of South Africa 12 

Historical perspective 12 

Resource overview. 1984 15 

Total available gold from producing South 

African mines 17 

Economic effect of byproduct production ... 18 

Capital and operating costs 19 

Effect of exchange rate variation upon 

industry profitability 20 

Annual production potential 22 

Ability of other market economy countries 
to compensate for the expected decline in 

South African production 24 

Gold mining in South Africa 24 

Underground mining 24 

Surface mining 27 

Gold milling in South Africa 27 

Low-grade milling 29 

Refining and transportation 30 

United States 30 

Historical perspective 30 

Resource overview, 1984 33 

Total gold availability and production cost 

evaluation: sixteen major producers 35 

Comparative long-run total production 

costs 37 

Annual production potential through 2000 . 38 
Primary gold mining in the continental United 

States 40 

Surface mining 40 

Underground mining 41 

Placer mining 42 

Gold milling in the continental United States . 42 

Heap leaching ( solution mining) 42 

Comparative economics of heap leaching 

and conventional milling 45 

Vat leaching of gold ores 46 

Extraction of gold with activated 

carbon 47 

Carbonaceous gold ores 48 

Refining and transporation 49 

Canada 50 

Historical perspective 50 

Recent perspective: 1968-83 50 

Production by deposit type 52 

Lode-type deposits 52 

Base metal deposits 53 

Placer deposits 53 



Resource overview, 1984 54 

Production cost and availability: current 

producers 56 

Comparative economics of underground 

production 56 

Total potential gold availability 58 

Annual gold production potential 58 

Hemlo gold district 58 

Background 58 

Impact of the Hemlo district upon future 

annual Canadian gold output 60 

Total annual production potential to 1990, all 

sources 60 

Primary gold mining in Canada 62 

Surface mining 62 

Underground mining 63 

Gold milling in Canada 63 

Operations 63 

Refining and transportation 64 

Australia 65 

Historical perspective 65 

Composition of mine production of gold, 

1970-83 65 

Minor primary gold operations 67 

Major byproduct gold operations 67 

Resource overview, 1984 67 

Gold availability and production cost 

evaluation: seven major primary producers . . 67 
Major primary and byproduct gold deposits 

awaiting or under development 70 

Mining methods and operating costs 71 

Metallurgical methods and operating costs. ... 71 

Refining and transportation 72 

Brazil 72 

Historical perspective 72 

Sources of production and production costs .... 73 
Possible new sources of production beyond 

1984 74 

Reserves and resources 75 

U.S.S.R 76 

Historical perspective, 1754-1983 76 

Soviet gold production by deposit type 77 

Placer production 77 

Lode production 78 

Byproduct gold production 78 

Reserves and resources 78 

Issues concerning Soviet gold production 79 

Other important gold producing countries 80 

The Philippines 80 

Papua New Guinea 80 

Chile 81 

Zimbabwe 81 

Colombia 82 

Dominican Republic 83 

Ghana 83 

Peru 84 

Mexico 84 

Possible gold projects in countries not 

evaluated 84 

References 85 

Appendix — Methodology of analysis 87 



VI 

ILLUSTRATIONS 

Page 

1. Index of exchange rates: United States, Canada, Australia, and South Africa 5 

2. Evaluated gold producing countries and 1983 production levels 6 

3. Percentage distribution by country of total contained and total recoverable gold in 111 selected 

properties 7 

4. Potential gold available at break-even costs of production from 111 operations in market economy 

countries as of January 1984 9 

5. Comparative long-term total production costs in selected countries 10 

6. Potential annual gold production to the year 2000 from 111 primary operations 11 

7. Potential annual gold production to the year 2025 from 111 primary operations 11 

8. Goldfields of the Witwatersrand Basin, South Africa 12 

9. Gold mining operations of the Orange Free State and Klerksdorp Goldfields 13 

10. Gold mining operations of the Far West Rand, West Rand, Central Rand, East Rand, and Evander 

Goldfields 14 

11. Gold ore and refined gold production in South Africa, 1970-83 14 

12. Potential total South African gold available at break-even costs of production as of January 1984 17 

13. Rate of increase in labor and equipment costs in rand and dollar terms, 1970-83 20 

14. Total gold revenues in rands and dollars, 1970-83 21 

15. Potential annual South African gold available at various break -even production cost levels, as of January 

1984 22 

16. U.S. gold production by ore source, 1905-83 31 

17. U.S. gold production by ore source, 1968-83 32 

18. Location of producing and prospective gold mining operations in the continental United States 33 

19. Location of producing and prospective gold mining operations in California and Nevada 34 

20. Areas of primary gold deposits in the continental United States 34 

21. Potential total U.S. gold available at various production cost levels from 16 major producers as of 

January 1984 36 

22. Potential annual U.S. gold production available at various break-even production cost levels from 16 

major producers as of January 1984 38 

23. Provincial distribution of Canadian gold production in selected years 51 

24. Total mine production of gold in Canada, 1968-83 51 

25. Mine production of gold in Canada by type of deposit for selected years 52 

26. Location of producing and prospective primary gold mining operations, areas of gold deposits, and 

historical lode gold mining districts in Canada 55 

27. Location of producing and prospective primary gold mining operations in Quebec, Ontario, and Manitoba . 55 

28. Contribution of capital and operating cost to total production cost for 15 selected Canadian operations .... 59 

29. Potential total Canadian primary gold available at various production cost levels from 15 selected 

operations as of January 1984 59 

30. Potential annual Canadian primary gold available at various break-even production cost levels from 15 

selected operations, 1984-2000 59 

31. Potential annual primary gold production from three developing mines in the Hemlo District, Ontario, 

Canada, 1984-2010 60 

32. Potential total Canadian primary gold available at various production cost levels from 18 selected 

operations as of January 1984 60 

33. Contribution of three Hemlo District operations to potential annual Canadian primary gold production, 

1984-2000 61 

34. Australian gold production, 1970-83 66 

35. Location of producing and prospective gold mining operations in Australia and areas of primary gold 

deposits 68 

36. Producing and prospective gold mining operations in Western Australia 68 

37. Selected major nonalluvial gold mining operations and areas of primary gold deposits in Brazil - • • • 73 



Vll 

TABLES 

Page 

1. Primary gold mining operations included in the availability study 3 

2. Gold production. 1971, 1981, and 1983, for the 10 largest producing countries 4 

3. Relationship between gold price, gold production, and exchange rate variations 5 

4. Estimates of total world gold production, by time period 6 

5. Estimated total production for five major historic gold producing countries 6 

6. World gold production in 1983 6 

7. Total demonstrated primary gold resources in 111 selected properties in market economy countries as of 

January 1984 7 

8. Supporting data for figure 4: distribution of total recoverable gold by cost level and country 9 

9. Comparative long-run total gold production costs in selected major producing countries 10 

10. South African gold ore and gold production, 1885-1983 15 

11. 1984 demonstrated gold resources in South Africa and comparison to past production 16 

12. Distribution of demonstrated gold resources in South Africa, by reef or reef group and by gold mining 

field 17 

13. Total gold potentially available at increasing cost or price levels from 38 underground operations in South 

Africa 18 

14. Ten largest South African operations in terms of total recoverable gold 18 

15. Ten largest South African operations in terms of average annual life-of-mine production 18 

16. Ten lowest cost producers in terms of long-run total break-even production cost 18 

17. Economic summary data for 38 underground gold mines in South Africa 19 

18. Total South African gold potentially available at increasing cost or price levels 20 

19. Estimates of potential annual South African production capabilities 23 

20. Mine operating cost estimates for underground gold mines on the Witwatersrand, South Africa 23 

21. Technical and operational data, within rankings as to mining cost levels, South African underground gold 

mines 24 

22. Comparison of mining productivity changes, 1960 and 1981, based on actual results at a South African 

mine 26 

23. South African milling methods and capacities 27 

24. Summary of sand and slimes material available for reprocessing in South Africa 29 

25. Mill characteristics of six low-grade surface waste reprocessing operations in South Africa 29 

26. Distribution of 16 major primary gold producers in the continental United States, by State and type of 

mining 33 

27. Gold resource data for selected primary gold mines and deposits in the continental United States as of 

January 1984 35 

28. Supporting data for figure 21: total gold potentially available from 16 major producing operations in the 

continental United States 36 

29. Long-run DCFROR for selected U.S. gold properties 36 

30. Comparative summary results of 1984 long-run cost determination analyses for producing and 

nonproducing surface operations in the continental United States 37 

31. Potential annual production estimates for 16 major primary gold producers in the United States 38 

32. Operations considered possible or probable primary gold producers during 1984-90 39 

33. Potential annual U.S. gold production circa 1990, by type of operation 39 

34. Combined operational data for major gold producing surface mines in the continental United States 40 

35. Comparative operational characteristics of continental U.S. surface mines, low and high mining cost 

levels 40 

36. Classification of producing surface operations by level of mine operating cost and grade of demonstrated 

resource 41 

37. Effect of lower mine operating costs on the ability to mine and process low-grade material at selected 

producing heap leach operations in the Western United States 41 

38. Operational characteristics of producing gold mills in the continental United States, by type of milling 

method, circa 1983 42 

39. Number of U.S. heap leach operations utilizing various mining and processing methods 43 

40. Labor productivity and operational characteristics for low-cost and high-cost heap leaching operations in 

the continental United States 44 

41. Comparative economics of producing heap leach and conventional milling operations in the continental 

United States 45 

42. Comparative characteristics of major vat leaching mills in the continental United States, circa 1983 46 

43. Variations of major circuit practices at vat leaching gold mills in the continental United States, early 

1980's 

44. Historical summary of the Canadian gold mining industry 50 

45. Gold production from Canadian lode-type deposits, 1973 and 1981, by Province 52 

46. Byproduct gold production from Canadian base metal operations, 1973 and 1981, by Province or Territory, 

number and type of operation 53 



TABLES— Continued 



Vlll 



Page 



47. Demonstrated resource data for selected major Canadian primary gold mines as of January 1984 54 

48. Comparative summary results of 1984 long-run cost determination analyses for underground Canadian 

mines 57 

49. Supporting data for figure 29: potentially available primary gold in 15 selected operations in Canada .... 57 

50. Summary results of 1984 long-run cost determination analyses for three developing mines in the Hemlo 

District of Ontario, Canada 57 

51. Supporting data for figure 32: potentially available primary gold in 18 major operations in Canada 57 

52. Canadian operations considered possible or probable primary gold producers during 1984-90 61 

53. Potential annual Canadian gold production by 1990, by type of operation 62 

54. Mining types, operating costs, capacities, and productivity for major Canadian gold operations 62 

55. Summary of milling methods in use at major primary gold milling operations in Canada, early 1980's .... 64 

56. 1981 capacities of Canadian dore bullion, scrap and residue gold refineries 64 

57. Historical summary of mine production of gold in Australia 1851-1983 65 

58. Operational categorization of Australian mine production of gold in selected years 66 

59. Aggregate gold resource data for selected Australian mines and deposits, 1984 67 

60. Summary results of 1984 long-run cost determination analyses for major Australian primary gold mines 

producing in 1983 69 

61. Australian deposits considered possible or probable gold producers during 1984-90 70 

62. Estimated Brazilian gold production and world ranking, 1975-84 72 

63. Expected 1984 Brazilian gold production, by operation and type of mining 74 

64. Varying estimates of actual and potential Brazilian gold production in selected years 75 

65. Gold production in Russia, 1754-1895, by geographic area 76 

66. Varying estimates of gold production in the Soviet Union for selected years 77 

67. Summary of 1970 operational data for Soviet gold operations from Dowie and Kaser's 1974 study 77 

68. Placer grades at various evaluated operations in market economy countries 78 

69. Important lode gold mining developments in the Soviet Union 78 

70. Estimates of annual Soviet gold sales, 1966-83 79 

71. Annual gold production in 10 important gold producing countries, 1975-83 81 

72. Breakdown of 1976 and 1982 gold production in Chile, by category of mining operation 81 

73. Estimated distribution of 1981 Colombian gold production, by Province and size of operations 82 

74. Gold production in Ghana, 1964, 1980-81, and 1983, by major producing entities 83 

75. Possible new gold mining developments of significance in countries not covered in the report 84 



UNIT OF MEASURE ABBREVIATIONS USED IN THIS REPORT 



d/yr 


day per year 


mt 


metric ton 2 


op 


degree Fahrenheit 


mt/d 


metric ton per day 


ft 


foot 


mt/yr 


metric ton per year 


g 


gram 


pet 


percent 


g/mt 


gram per metric ton 1 


ppm 


part per million 


ha 


hectare 


St 


short ton 


kg 


kilogram 


tr oz 


troy ounce 3 


km 


kilometer 


tr oz/yr 


troy ounce per year 


m 


meter 


wt pet 


weight percent 


m 3 


cubic meter 


yr 


year 



GOLD AVAILABILITY— WORLD 
A Minerals Availability Appraisal 

By Paul R. Thomas 1 and Edward H. Boyle, Jr. 2 



ABSTRACT 



The Bureau of Mines evaluated the long-term cost and availability of primary gold 
production from 135 mines and deposits worldwide. Collectively, the evaluated coun- 
tries represent 93 pet of world gold production. Total recoverable gold available (as of 
January 19841 from a subset of 1 1 1 significant producing mines and developing deposits 
in 13 market economy countries (MEC's) is estimated at 810 million tr oz. The Republic 
of South Africa is estimated to account for 87 pet of total recoverable gold. The United 
States and Canada account for 4 and 4.5 pet of the total, respectively. Eighty-three per- 
cent of total recoverable gold is available at a constant 1984 break-even price of $400/tr 
oz, and 70 pet is available at $300 tr oz. South Africa accounts for 90 pet of the gold 
available at $400 tr oz or less. 

Major conclusions are that (1) South Africa should remain the largest world pro- 
ducer through the year 2000, (2) annual MEC output in 2000 should not be significantly 
different than current output given constant 1984 gold prices of more than $300/tr oz, 
and (3) there may be a significant decline in production after 2010 in the absence of 
major new discoveries and continued development of new mines to offset the depletion 
of the South African mines. 



'Economist. 
"Geologist. 
Minerals Availability Field Office. Bureau of Mines. Denver. CO 






INTRODUCTION 



Since the late 1970's the world gold mining industry 
has been characterized by dynamic growth in production 
and volatility in price. World production in 1983 was almost 
15 pet greater than in 1980, and the short-term trend con- 
tinues upward. Annual dollar-based price changes since the 
early 1970's have been unprecedented in both magnitude 
and volatility. This commodity, which sold for $35/tr oz 3 for 
over a third of a century, reached an annual average $612/tr 
oz in 1980. Until 1980, the future price of gold seemed set 
on an upward trend. Since that year, however, world gold 
prices have fallen by over 50 pet to slightly over $300/tr 
oz at the end of 1984. 

Against this background, this study was undertaken to 
determine (1) the level of world demonstrated gold re- 
sources, (2) total and annual availability of gold mine pro- 
duction, (3) long-run production costs per operation and by 
national aggregates, (4) the economic and technical factors 
that impact upon cost and availability, and (5) probable 
future mine production and cost trends. 

One statement concerning the results of this study must 
be made at this point: the unprecedented rise in the price 
of gold, especially beginning in the mid-1970's, caused ex- 
ploration and new mine development to expand worldwide 
at a rapid pace. This pace has continued through 1984, even 
given the decline in U.S. dollar gold prices since 1980. One 
reason is the poor economic outlook for base metals, which 
by comparison renders gold an attractive investment alter- 
native for the mining industry in general. During the last 
few years, gold exploration results, mine expansions, and 
new mine developments have been reported on an almost 
daily basis. This increase in activity has been most evident 
in major producing nations such as the United States, 



Canada, Australia, and Brazil, although seemingly every 
nation is experiencing some activity. Even South Africa, 
the industry leader which as recently as 1981 was being 
written off as a rapidly dwindling producer, has increased 
its level of production, resources, and new mine develop- 
ment since 1980. The outlook for future gold price and pro- 
duction response, however, remains one of uncertainty. 

Table 1 lists the evaluated primary gold operations by 
nation and productive status. This list consists of 135 
primary gold mines and deposits which were subjected to 
complete evaluation to determine demonstrated resources 
and long-run total production costs. These 135 properties 
represent the great majority of known gold resources and 
annual production in the market economy countries 
(MEC's). The study also presents recent information on ap- 
proximately 65 other (mostly small) properties in various 
stages of development or initial production. These other 
properties are all new developments that have been reported 
in the literature within the last 3 yr. They are perhaps the 
best indicator of the intense level of dynamic activity that 
has characterized the world gold industry in recent years. 
In addition to the above primary mines and deposits, over 
200 base metal mines and deposits were evaluated to deter- 
mine byproduct gold content. 

No other commodity throughout history has maintained 
the economic and political importance of gold, and with the 
possible exception of oil, no other commodity has undergone 
so much rigorous analysis by so many individuals, com- 
panies and nations. This Bureau of Mines appraisal makes 
a unique contribution to this body of literature as a result 
of its extensive mine coverage and the detailed engineer- 
ing and economic cost analyses that it has produced. 



ACKNOWLEDGMENTS 



Domestic and foreign data collection were performed 
under contract by Morrison-Knudsen Co., Inc., Boise, ID, 
and Davy-McKee Corp., San Ramon, CA. Personnel of the 



Bureau's Minerals Availability Field Office, Denver, CO, 
evaluated the data and performed the engineering and 
economic evaluation analyses. 



COMMODITY OVERVIEW 



Gold is a unique mineral commodity in that it is, above 
all, an alternate store of wealth to fiat currencies, most 
notably the U.S. dollar. The U.S. dollar serves as the 
primary medium of exchange in international transactions 
and is the currency in which world gold prices are 
denominated. For that reason, the following interactive fac- 
tors all impact directly upon the demand for, and price of, 
gold: 

1. The level of U.S. interest rates; 

2. General inflationary trends and expectations; 

3. The rate of growth in U.S. money supply; 

4. The exchange rates between the U.S. dollar and other 
major currencies; 



3 The troy ounce = 31.1035 g. 



5. The balance of payments position in U.S. trade 
accounts; 

6. Government budget deficits; 

7. Perceived or real economic, political, or natural 
crises, etc. 

The great majority of gold is held either as an invest- 
ment medium or as a form of insurance to hedge against 
uncertainty about the value of fiat currency or potential 
disaster. Only a small percentage of the world's total gold 
production has been consumed in industrial applications, 
and much of that metal will eventually be recycled. 

Gold is a unique mineral commodity also in that long- 
term production cost increases do not in and of themselves 
imply rising market prices as is the general case with base 
metals. This is because typical world annual production of 



Table 1. — Primary gold mining operations 
Included In the availability study 



Tabla 1 . — Primary gold mining operations 
Included In the availability study — Continued 



Country and operation name 



Australia: 

Central Norseman 

Fimiston Leases 

Hill 50-Morning Star 

Mt. Charlotte 

Mt. Morgan Tailings Project 

North Kalgooriie 

Telfer 

Bolivia: Teoponti 
Brazil: 

Morro Velho 

Serra Pelada 

Canada 

Agmco-Eagle (Gold Div.) 

Camflo-Malarctic Hygrade 

Campbell Red Lake 

Con-Rycon 

Detour Lake 

Dickenson 

Dome 

Giant Yeltowknrfe 

Golden Giant (Hemlo) 

Kerr Addison 

Lac Minerals (Hemlo) 

Ladner Creek 

Lupin Project 

Macassa (Willroy) 

Pamour Porcupine 

Sigma 

Specogna 

Teck-Corona (Hemlo) 

Chile: El Indio 

Colombia 

El Bagre 

La Saiada 
Dominican Republic: Pueblo Viejo 
Ghana 

Ashanti 

Preslea 

Tarkwa 

Mexico: Pinzan Morado 

Philippines 

Benguet Gold Operations 

Masbate 

Paracaie 
Republic of South Africa 

Beatrix 

Blyvoorurtzicht 

Bracken 

Buffetsfontein 

Consolidated Moddertontein . . . 

Deelkraal 

Doomfontein 

Dretnfontein Consolidated 

Durban Roodepoort Deep 

East Rand Proprietary Mine 

Egoli Consolidated (East) 

Egoii Consolidated (West) 

Elandsrand 

Ergo (East Rand Au & U Co.) 

E T Consolidated 

Fajrview (Barberton Mine) 

Free State Geduld 

Grootvtei 

Harmony 

Hartebeestfontei n 

Joint Metallurgical Scheme 

K "oss 

Kloof 

Leslie 

Libanon 

Loraine (Allanndge) 

Manevale 

President Brand 

President Steyn-Video 

Randtontetn Estates 

RMMM Slimes Project 

Simmer and Jack 

St Helena 

Stilfontein 

Untsel 

Vaal Reefs 

Venterspost 

Village Mam Reef 

West Rand Consolidated 

Western Areas 

Western Deep Levels 



r , 


Status as of 


lype 


January 19842 


U 


P 


U 


P 


U 


P 


U 


P 


SD 


P 


U 


P 


S 


P 


SD 


P 


U 


P 


S 


P 


U 


P 


U 


P 


U 


P 


U 


P 


U 


P 


U 


P 


U 


P 


U 


P 


U 


N 


U 


P 


U 


N 


U 


P 


U 


P 


U 


P 


U 


P 


u 


P 


S 


N 


u 


N 


u 


P 


SD 


P 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 


u 


N 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


s 


P 


s 


P 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


u 


P 


s 


P 


u 


P 


u 


P 


u 


P 



Country and operation name Type' Status as of 
' _ ,K January 1984* 

Western Holdings Complex U P 

Winkelhaak U P 

Witwatersrand Nigel U P 

Taiwain: Chinkuashih U P 

United States: 

Alaska: 

Apollo U N 

Bear Creek S P 

Big Hurrah S P 

Chicken Unit S P 

Circle Unit S P 

Fairbanks Unit S P 

Golden Zone U N 

Independence U N 

Kougarok District S P 

Livengood Placers S P 

Mikado U P 

Nome Beaches S P 

Peters Creek S P 

Solomon Unit S P 

Tuluksak Dredges S P 

Wiseman Unit S P 

California: 

McLaughlin S N 

Royal-Mountain King S N 

San Juan Ridge S N 

Yuba Placer Operations SD P 

Colorado: Victor Project S P 

Idaho: 

Homestake- Yellow Pine S N 

West End-Garnet Creek S P 

Michigan: Ropes U N 

Montana: 

Golden Sunlight S P 

Zortman-Landusky S P 

Nevada: 

Alligator Ridge S P 

Battle Mountain S P 

Borealis S P 

Carlin Operations S P 

Goldfield Project S N 

Jerritt Canyon S P 

Pinson-Preble-Ogee S P 

Round Mountain S P 

Windfall S P 

New Mexico: Ortiz S P 

South Dakota: Homestake U P 

Utah: Mercur S P 

Washington: Knob Hill U N 

Zimbabwe: 

Arcturus U P 

Athens U P 

Blanket U P 

Dalny u P 

How U P 

Mazoe U P 

Muriel U P 

Old West-Redwing U P 

Patchway-Brompton U P 

Renco U P 

Shamva U P 

Venice U P 

'S — surface. SD — surface (dredging), U— underground. Any operation utiliz- 
ing underground mining for a majority of mill feed is classified as underground. 
Those operations utilizing entirely surface material for mill feed are classified 
as surface. 

2 N — nonproducer. P— producer 



newly mined gold is approximately 1,000 to 1,300 mt", 
whereas total world gold stocks stand at a minimum level 
of 100,000 mt. With new supply representing only about 
1 pet of world stocks, production costs of newly mined gold 
have little influence upon market price relative to 
movements of the large volume of aboveground stocks. Also, 
since most new gold goes into jewelry, bullion, and < i 
or is held for security reasons, it is not really "consumed" 
but rather becomes part of the existing stock. As world 
stocks increase, the effect of stock movements upon price 
movements increases as well. 









The metric ton - 32,150 tr oz. 



At the level of individual producing mines, gold produc- 
tion, in general, responds inversely to the market price of 
gold. However, the production response in the overall in- 
dustry is composed of two parts. There is the response of 
current producers and the response of exploration and new 
mine development. Current producers with the ability to 
vary the average grade of their mill feed (pay limit) respond 
to rising gold prices by lowering this cutoff grade or pay 
limit. Gold output thus falls or remains more or less con- 
stant even though mill throughput increases. In this case, 
higher gold prices enable mines to produce less gold without 
lowering revenues and extend the life of the mine. Converse- 
ly, falling gold prices for these operations will generally 
result in the cutoff grade being raised (where possible) which 
raises production, compensates for the lower gold price, and 
maintains sufficient revenues but could result in a shorten- 
ing of mine life. 

In the case of new mine development, the reaction is 
different. Rising gold prices will elicit renewed effort at ex- 
ploration and new mine development. This has been 
especially true in gold since the dramatic price increases 
of the mid to late 1970's. The development of a gold mine 
from deposit discovery to production can take roughly 2 to 
10 yr, depending upon a host of technical, financial, and 
legal factors. The new gold supply that results from rising 
gold prices is thus temporal in its impact. For example, the 
high gold prices of 1979-80 resulted in many new mine 
developments which began producing between 1981 and 
1984. To the extent that the current, relatively low, U.S. 
dollar price of gold causes exploration, new mine develop- 
ment, and expansion plans to be reduced or delayed, the 
impact upon production will not be evident for a few years 
because of this time lag. 

An examination of recent gold production and price data 
demonstrates the net effect on world gold production from 
the interaction of these two responses outlined above. Table 
2 contains production data for 1971, 1981, and 1983. From 
1971 to 1981, annual gold production from the eight largest 
MEC producers collectively declined by 9.0 million tr oz. 
During the same period, the price of gold increased from 
$41/tr oz to $460/tr oz. South African output declined by 
10.2 million tr oz, while the United States, Canada, and 
Australia posted declines ranging from 81,000 to 570,000 
tr oz. Output in other countries (primarily the Soviet Union, 
China, and Brazil) increased enough to offset around 5.4 
million tr oz of this overall decline. The net effect was that 
total world gold production fell by 5.2 million tr oz between 
1971 and 1981. 

Most of the South African production decline was due 
to a lowering of the average mill feed grade (pay limit) and 
the opening up of newer, lower grade areas as a result of 
rising gold prices. Since 1981, annual South African pro- 
duction has increased by approximately 762,000 tr oz while 
the U.S. dollar price of gold has fallen. The price of gold 
during 1983 averaged around $35/tr oz lower than the 
average 1981 price and more than $187/tr oz lower if com- 
pared to the average 1980 price. 

South African and other MEC private sector producers 
have, where possible, clearly raised their average mill feed 
grades to compensate for this declining price in order to 
maintain sufficent operating revenues. In addition, new 
mines came into production during the 1979-83 period. In 
other countries the production responses have been quite 
different owing to a number of interrelated aspects unique 
to each country's gold industry; these are dealt with in 
detail in the individual country sections. 



Table 2. — Gold production, 1971, 1981, and 1983 for 

the 1 largest producing countries, thousand troy 

ounces 



Change 
1971-81 



Change 
1981-83 



-10,268 


+ 762 


+ 1,725 


+ 175 


-570 


+ 601 


-116 


+ 578 


+ 1,650 


+ 200 


+ 1 ,043 


+ 400 


-81 


+ 444 


+ 118 


+ 59 


+ 529 


+ 29 


+ 337 


+ 170 


-5,640 


+ 3,389 


-9,015 


+ 3,014 


-5,244 


+ 3,283 



Country 1971 1981 1983 

South Africa 31,389 21,121 21, 84 7 

Soviet Union 9 6,700 8,425 8,600 

Canada 2,243 1,673 2,274 

United States 1 ,495 1 ,379 1 ,957 

China "50 1,700 1,900 

Brazil 157 1,200 1,600 

Australia 672 591 1 ,035 

Philippines 640 758 817 

Papua New Guinea . . 24 553 582 

Chile 64 401 571 

Total 43,434 37,794 41,183 

8 largest 

market economy 

countries 1 36,684 27,669 30,683 

Total world 46,494 41 ,250 44,533 

'Estimated. 'Less the Soviet Union and China. 
Sources: Lucas (7), BuMines (20). 



Table 3 explains the general relationship evident in 
some major free world producers between the gold price of 
a nation's currency, the currency price of gold, and the ex- 
change rate relationship between the U.S. dollar and these 
other currencies. The relative movements of these variables 
, have a very significant impact upon the grade and quantity 
of gold ore that is mined and the amount of refined gold 
that is produced in these countries. The data presented are 
for the three largest MEC gold producers. An example us- 
ing Canada will make the paramount importance of these 
relationships apparent. 

In 1978, the U.S. dollar price of gold was $194/tr oz. This 
meant that Canadian mines needed to produce 4.51 
milliounces of gold (0.00451 tr oz) to earn $1 in revenue. 
This 4.51 milliounces was the "Canadian gold price of the 
U.S. dollar" in 1978 and dictated the grade and quantity 
of ore that was mined in Canada. The exchange rate be- 
tween U.S. and Canadian dollars in 1978 was US $0.88 = 
Can $1. Thus, the Canadian gold price in 1978 was 
Can$221/tr oz. Since Canadian primary lode gold produc- 
tion in 1978 was 1.185 million tr oz, Canadian dollar 
revenues totaled Can$262 million. At the average 1978 ex- 
change rate, this was the equivalent of US$230 million. 

In 1980, the average price of gold had risen by 69 pet 
to an historic high of $612/tr oz. This was the Canadian 
equivalent of Can$716/tr oz. The impact of the price rise 
on production was to allow material of much lower grade 
to be profitably mined. Thus, the "Canadian gold price of 
the U.S. dollar" also fell 69 pet to 1.39 milliounces for 1980. 
Canadian lode gold production in 1980 declined to 1.074 
million tr oz as a result of lower grade ore being mined. But 
revenues in terms of both currencies were more than dou- 
ble their 1978 level despite this drop in production. 

In 1983, the opposite result was evident. The price of 
gold fell 31 pet to $425/tr oz. The "Canadian gold price of 
the U.S. dollar," by definition, increased 37 pet. Production, 
responding inversely to price, increased 69 pet owing to pro- 
ducing mines increasing the grade of ore mined (where 
possible) and new mines coming into production as a result 
of the rising prices of the late 1970's. The overall result was 
that revenues in U.S. dollar terms increased 18 pet despite 
the decrease in the gold price. Similarly, Canadian dollar 
gold revenues rose, but by a larger percent (24) owing to 
the decline in the value of the Canadian dollar relative to 
the U.S. dollar. 



Table 3. — Relationship between gold price, gold production, and exchange rate variations 



Country 
and currency 



Year 



Gold per local 

currency unit, 

1 3 tr oz 



Change 

from prior 

period 

pet 



Exchange rate, 
U.S. dollars 

per local 
currency unit 



Primary lode 
gold mine 

production, 
10 3 tr oz 



Gold market 

price, 1 
local currency 
per troy ounce 



Value or production 



10 6 local 
currency unit 



10 6 US 
dollars 



United States 
dollar (S) . . . 



Canada - dollar 
(CanS) 



South Africa 
rand (R) 



1978 
1980 
1983 



1978 
1980 
1983 



1978 
1980 
1983 



5.15 
1.63 
235 



4.51 
1 39 

1 90 



592 
209 
2.11 



NAp 
-68 
-44 



NAp 
-69 

-37 



NAp 
-64 

-1 



1.0 
1.0 
1.0 



8766 
8552 
8114 



1.1500 

1 2854 

8991 



580 

636 

1.553 


$194 
$612 
$425 


$112.5 
$389.2 
$660.0 


1.185 
1.074 
1.824 


Can$221 

Can$716 
Can$524 


Can$261.8 
Can$7690 
Can$955 7 


22,700 
21.705 
21.847 


R169 
R476 
R473 


R3.8360 
R10.331.0 
R10, 333.0 



NAP Not applicable 

'Based upon the US dollar average annual price of gold converted at the average annual exchange rate. 



112.5 
387.2 
660.0 



229 5 

657.6 
775.5 



4,411 

13.279 

9,290 



1.20 



1. 10 



1.00 



c 

c 



Si 90 
x" 

c 



sz 



n 



<iZ 



'Australia 



United States 



Sooth Atrica 




'-~z 



1972 



1974 



1976 



1978 



1980 



1962 



1964 



Figure 1. — Index of exchange rates: United States, 
Canada, Australia, and South Africa. 



Variations in exchange rates have significantly im- 
pacted industry profitability in recent years. This is because 
production costs are usually denominated in local curren- 
cies, but gold revenues, ultimately, are based upon the in- 
ternational price of gold in terms of the U.S. dollar. If a coun- 
try's currency declines in value more than the dollar price 
of gold, the resultant foreign exchange gain can offset both 
rising production costs and declining prices, albeit not in- 
definitely. This very important relationship is discussed in 
detail for South African mines in that country's individual 
chapter. For now, figure 1 will suffice to underscore the re- 
cent history of exchange rate variations for four of the 
largest MEC gold producers. The figure indexes the current 
value of each currency relative to its 1975 value. As shown, 



the currencies of Australia, South Africa, and Canada have 
declined in value, relative to the U.S. dollar, since 1975. 
For example, the 1983 South African rand had only 65 pet 
of the purchasing power of the 1975 rand. 

The following summary presents the general results of 
this study. It provides comparative results of resource and 
production availabilities, production costs, and future pro- 
duction potential as determined for each nation included 
in this study. It is intended as a general overview. The gold 
mining industries of each country vary a great deal owing 
to many country-specific factors. Indeed, each gold mining 
industry and each gold mine is absolutely unique For this 
reason each major producing country is covered in detail 
in a subsequent chapter. 



HISTORICAL PERSPECTIVE ON PRODUCTION 
THROUGH 1983 

The point of reference of this study is January 1984. This 
section places the 1984 resource availability and produc- 
tion potential in an historical perspective. The intention is 
to give a general idea of how much gold had been produced 
prior to January 1984, and the sources of that production, 
as well as how much gold is currently being produced from 
present sources. 

Table 4 provides data on the historical production of gold 
by time period. It is estimated that as of 1984 between 3.8 
and 4.0 billion tr oz of gold had been produced throughout 
history. This is roughly equivalent in volume to a cube 55 
ft on a side. Approximately 60 pet of this historical total 
has been produced in just the last 53 yr with 45 pet of the 
production during the last 53 yr coming from just one na- 

Table 4.— Estimates of total world gold production, 
by time period 

Total world . . . ... 

Time period gold production, Areas of ma J ' Production, 

M 1f j6 troz ranked by size 

3900 B.C. - A.D. 1492 400-500 Africa, Europe, Asia. 

1493-1600 23 South America, Africa, 

Europe. 

1601-1700 29 Do. 

1701-1800 61 South America, Europe, 

Africa, Mexico. 

1801-1900 374 United States, Australia, 

Soviet Union, South 
Africa, Asia. 

1901-30 585 South Africa, United 

States, Soviet Union 
Australia, Canada, Asia. 

1931-83 2,286 South Africa, Soviet 

Union, Canada, United 
States, Australia. 
Total (rounded) 3,800-4,000 NAp. 

NAp Not applicable. 

Sources: Mohide (4) and the authors' own estimates based upon numerous 
other sources. 




Table 5. — Estimated total production for five major 
historic gold-producing countries 1 



Country 



First major 
discoveries 



Total production 
10 6 tr oz 



Relative reliability 
of estimate 



South Africa . . 


1872 


1,247 


Good. 


Soviet Union . 


1775 


350-450 


Poor. 


United States . 


1799 


335 


Good. 


Canada 


1866 


215 


Do. 


Australia 


1851 


190 


Do. 



1 Compiled from numerous sources and authors' own estimates. 



Table 6. — World gold production in 1983 1 



Country 



1983 gold 

production, 

103 tr oz 



1983 
ranking 



Major countries (discussed in detail): 

South Africa 21 ,847 

Soviet Union 8,600 

Canada 2,274 

United States 1,957 

Brazil 1 ,600 

Australia 1 ,035 

Subtotal (84 pet of total) 

Important countries (general discussion): 

China 1 

Philippines 

Papua New Guinea 

Chile 

Zimbabwe 

Colombia 

Dominican Republic 

Ghana 

Peru 

Mexico 

Subtotal (13 pet of total) 
40 other countries (not discussed) 
(3 pet of total) 

Total (100 pet) 44,533 

NAp Not applicable. 

'Not discussed owing to a lack of information on gold resources. 

Sources: Lucas (1), BuMines (20). 



37,313 


NAp 


1,900 


5 


817 


8 


582 


9 


571 


10 


430 


11 


429 


12 


348 


13 


303 


14 


166 


15 


223 


16 


5,339 


NAp 


1,881 


NAp 



NAp 







PHILIPPINES 
0.8 



'SOUTH AFRICA 
21.9 



r^Jas, » PAPUA NEW GUINEA 

a t'^> °- 6 






Figure 2.— Evaluated gold producing countries and 1983 production levels (10 e tr oz). 



tion, the Republic of South Africa. This is why the issue of 
world gold availability (especially MEC gold availability) 
centers on the ability of South Africa to maintain its enor- 
mous productive capacity. 

The Soviet Union has not released any production data 
since 1934, when it began a policy of treating all such data 
as state secrets. Estimates, not surprisingly, have shown 
wide variation over the years. A reasonable estimate of 
Soviet Union gold production since 1930 would be between 
250 and 350 million tr oz. This means that the Soviet Union 
and South Africa not only account for 75 pet of current world 
production but have also accounted for 55 to 60 pet of total 
production since 1930. World gold production should remain 
dominated by these two nations for the remainder of the 
20th century. 

Table 5 summarizes historical production for the five 
countries that have accounted for a majority of world gold 
production since 1930 and places a reliability estimate on 
the total production figures. Table 6 provides a breakdown 
of 1983 world production. Figure 2 shows the 15 countries 
discussed in this study and their 1983 production amounts. 
They represent 15 of the top 16 world gold producing coun- 
tries; China is omitted owing to lack of information. 

As shown in table 6, the six nations discussed in detail 
in this study accounted for 84 pet of 1983 world gold pro- 
duction. The People's Republic of China (ranked fifth) is not 
discussed at all owing to a lack of information on gold 
resources. The five MEC's evaluated in detail similarly ac- 
count for 84 pet of MEC production. 

RESOURCE OVERVIEW, 1984 

Demonstrated resource tonnages and weighted average 
grades were determined for all 135 primary gold proper- 
ties 'table 1) in the 14 market economy countries that were 
included in the cost evaluations. This overview concerns 
itself primarily with a subset of 111 operations that were 
either known producers as of 1984 or major operations in 
the late stages of development that appeared certain to come 



Canada 
4 6 pet 

United States 
44 pet 



Others 
4 pet 




into production during 1984-86. This latter group consists 
of only four properties: the McLaughlin operation in Califor- 
nia, United States, and the Golden Giant, Lac Minerals, 
and Teck-Corona operations in the Hemlo District of On- 
tario, Canada. The 107 major operations producing in 1984 
easily account for over 90 pet of primary gold production 
and over 80 pet of total primary plus byproduct production 
in the MEC's. The excluded properties are 16 Alaskan 
operations of intermittent or questionable production status, 
6 nonproducing properties in the continental United States, 
1 nonproducing property in Canada, and 1 nonproducing 
property in Mexico. Cost and availability estimates for these 
24 nonproducing properties are discussed in the individual 
country chapters. 

Table 7 and figure 3 provide summary data, by coun- 
try, of total 1984 demonstrated gold resources in the 111 
selected properties. The estimates on the left side pie of 
figure 3 are presented on a contained basis; that is, the total 
amount of gold contained in the mill feed. This measure 
accounts for mining recovery and dilution. As is clearly evi- 
dent, the vast majority of gold on a contained basis is ac- 
Table 7. — Total demonstrated primary gold resources 
in 1 1 1 selected properties in market economy 
countries as of January 1984 



Country 



Total contained 
gold, 10 6 tr oz 



Total recoverable gold 
10 6 Pet of 

tr oz total 



South Africa 

United States' 

Canada' 

Brazil 

Ghana 

Australia 

Philippines 

Zimbabwe 

Chile 

Bolivia and Colombia 

Taiwan 

Total 



758.0 

40.4 

38.4 

10.5 

7.3 

6.7 

4.1 

3.7 

2.4 

1.0 

.5 



716.0 

32.2 

36.6 

9.8 

6.0 

6.4 

3.5 

3.0 

2.0 

.8 

.4 



87 
4 
4.5 
1 
<1 
<1 
<1 
<1 
<1 
<1 
<1 



873 



819 



100 



'Estimates differ from totals given in country sections owing to the exclu- 
sion of certain nonproducing properties. 

NOTE —Data may not add to totals shown because of independent 
rounding. 



Canado 
4 5 pet 

United States 
4 pet 



Others 
4.5 pet 




Figure 3.^-^eroentege 



Totol contained gold Total recovernhle gold 

873 xlO 6 rroz 819 x lO 6 troz 

distribution by country of total contained and total recoverable gold In 1 1 1 selected properties. 



counted for by just three countries, the Republic of South 
Africa, the United States, and Canada. South Africa alone 
accounts for 87 pet of the total contained gold. The domina- 
tion of these three countries is due to two factors. First, the 
Witwatersrand Basin of South Africa is the single largest 
source of gold the world has ever known. Second, Canada 
and the United States have benefitted from ongoing explora- 
tion and development activity due to their having large 
established mining industries with abundant technical ex- 
pertise and sufficient financial capital. These countries also 
have histories of political and economic stability. Australia 
accounts for just under 1 pet of total contained gold and has 
the same historically strong mining industrial base as 
Canada, the United States, and South Africa. This nation 
has added significantly to its demonstrated resources in re- 
cent years and has good potential for further additions as 
exploration and development activity continues. 

There are two caveats to the above resource analysis 
which must be made to place world gold resources in the 
proper perspective. They concern the type of resource data 
that are reported, and the type of resource occurrence that 
accounts for production in an individual country. 

First, the information reported often varies owing to 
Government policies and also to a reluctance on the part 
of many mining companies to divulge data on their gold 
operations. This is due to a number of factors. Among them 
is the desire to minimize or avoid taxation in countries that 
tax the value of unmined gold reserves. Also, most public- 
ly held mining companies are required to report their 
reserves (as opposed to resources) annually to various in- 
stitutions. For valid reasons, these annual reported reserves 
are usually defined as that ore which has been developed 
on at least three sides and assayed as thoroughly as re- 
quired. These "proven reserves" are redefined each year 
based on production, new development, new assays, changes 
in prices and costs, and, possibly, changes in technology. 
These proven reserves are justifiably conservative for the 
above reasons and because many vein-type gold mines are 
geologically erratic, which makes reasonable inferences of 
resources difficult or perhaps impossible. Also, exploration 
work to delineate resources is a costly and time consuming 
endeavor and will not be done by small operators or poor 
countries, or perhaps even by large operators that have been 
in production for a long time. For example, some mines in 
Canada have annually reported proven reserves sufficient 
for only 1 to 5 yr of production and have been doing so for 
20 yr or longer. Most gold mining operations will not 
estimate beyond the proven reserve level without a very 
good reason, such as plans for major capital investments. 

The second caveat deals with the type of resource oc- 
currence in an area or country. Some countries, such as 
Brazil, Colombia, Bolivia, and the U.S. State of Alaska, 
derive the great majority of their gold production from 
placer deposits. These operations are generally small scale, 
intermittent, and nearly impossible in most cases to 
estimate for contained resources, much less costs of produc- 
tion. In the case of Brazil, especially, most production 
emanates from tens of thousands of individuals or small 
groups mining placer deposits in the Amazon Basin. The 
Government of Brazil does not really know how much gold 
is produced or smuggled out of the country. Brazil un- 
doubtedly has large gold resources, but attempting to 
measure them is virtually impossible. 

Thus, there are two forces at work in terms of 
demonstrated resource estimation. First, the largest and 
best established areas generally have the best estimation 
and reporting. Second, those countries or areas with 



geological occurrences that lend themselves relatively easily 
to estimation, such as the Witwatersrand Basin, have the 
best available data in terms of quality and quantity. In the 
case of the South African mining industry, the quality and 
quantity of reported data are unsurpassed. Basically, the 
key to ascertaining world demonstrated gold resources is 
to know where gold has not been measured or reported in 
addition to knowing where it has been measured and 
reported. This study, by necessity, deals only with countries 
and areas where enough basic information is collected and 
reported so that it is possible to estimate demonstrated 
resources with some reasonable degree of confidence. In that 
sense, the demonstrated resource estimates of this study 
must be considered conservative. 



TOTAL PRIMARY GOLD AVAILABILITY AND 
PRODUCTION COST EVALUATION 

The same subset of 111 operations were evaluated to 
determine relative long-term production costs and total gold 
availability. Figure 4 and supporting data in table 8 sum- 
marize the overall results of this evaluation. This figure 
and table relate cumulative gold availability to increasing 
production cost levels. In addition, table 7 relates total gold 
availability by nation, and the right side of figure 3 relates 
total gold availability by national percentage contributions. 

The major conclusions of the total availability evalua- 
tion follow: 

1. South Africa is by far the single largest source of 
economic gold production. It represents 716 million tr oz 
(87 pet) of the 810 million tr oz of total recoverable gold 
available from these 111 operations. 

2. 70 pet of total recoverable gold is economic at a cost 
level of $300/tr oz or less. This gold is available from just 
46 operations, 23 of which are in South Africa. South 
African mines account for 90 pet of the gold in this cost 
range. 

3. 83 pet of total gold is available at a cost level of 
$400/tr oz or less. This additional 13 pet is contained within 
another 25 operations. South African mines also account 
for 90 pet of total gold available at $400/tr oz or less. 

4. The great majority (94 pet) of recoverable gold 
available from the evaluated demonstrated resources is con- 
tained within ore bodies mined by underground methods. 
The individual country percentages South Africa, 98 pet of 
gold available from underground resources; Canada, 91 pet; 
Australia, 77 pet; United States, 17 pet. 



COMPARATIVE PRODUCTION COSTS IN 
MAJOR PRODUCING COUNTRIES 

Table 9 and figure 5 contain comparative long-run cost 
data for South Africa, Canada, the United States, and 
Australia. A general comparision of production costs reveals 
that capital costs per ounce of recovered gold are similar 
among the four countries. For underground resources, the 
weighted average estimates for capital costs range from 
$52/tr oz to $73/tr oz recovered gold. Surface mining capital 
costs in the United States and Australia are effectively the 
same at $47/tr oz and $48/tr oz, recovered gold, respective- 
ly. Total capital costs are obviously much greater for 
underground operations because of the need for such high- 
cost items as shaft systems and mine plant facilities plus 
more expensive exploration requirements. However, owing 



Table 8. — Supporting data for figure 4: distribution of total recoverable gold by cost level and country 



BreaK-even 
cost or 

price level' 

$200 or less 



$300 or less 
$400 or less 

$500 or less 

$600 or less 

$700 or less 
Over S700 



Number of 
operations 

(cumulative) 

14 



46 

71 

96 

105 

107 
111 



Total recoverable 

gold. 10 s tr 02 

(cumulative) 

184.5 



576 4 
667.6 

773.1 

811.8 

812.5 
819.0 



Cumulative 

percent ol total 

availability 

22 



70 
83 

94 

99 

99 

100 



Countries within 

indicated range, ranked 

by amount of 

recoverable gold 

$200 or less: South 
Africa, Canada, Brazil, 
United States, 
Dominican Republic. 

$201 to $300: South 
Africa, Canada, United 
States, Australia, 
Philippines, Zimbabwe, 
Chile, Bolivia. 

$301 to $400: South 
Africa, Canada, United 
States, Australia, 
Brazil, Zimbabwe, 
Colombia. 

$401 to $500: South 
Africa, Canada, United 
States, Philippines, 
Australia, Zimbabwe. 

$501 to $600: South 
Africa, Zimbabwe, 
Canada, United States. 

$601 to $700: Canada, 
Zimbabwe. 

Over $700: Ghana, 
Taiwan. 



'The breaK-even cost or price level is that point where long-run total production cost per ounce = required price per ounce to obtain a 0-pct discounted cash 
flow rate of return (DCFROR). 



700 



-tr> 




100 200 300 400 500 600 700 

TOTAL RECOVERABLE GOLD, I0 6 tr oz 



800 



900 



Figure 4. — Potential gold available at break -even coeta of production from 111 operations In market economy coun- 
tries as of January 1 984. 



10 



400 



350 



3O0 



250 



CD 

en 



- 200 



O 
o 



< 150 



100 



Surface 




Underground 



1 



J 



■ 



KEY 
f^\\\^j Breakeven costs 
[ff&;';| Operating costs 
I Capital costs 



United States Australia South Africa Canada 

COUNTRIES 

Figure 5. — Comparative long-term total production 
c<o«ts In selected countries. 



Yabla 9.— Comparative long-ran total goM production costs In soloctsd major producing countries 



Country 



Resource 
occurrence 



Capital cost 
per troy ounce' 

Weighted 



Range 



average 



Operating cost 
per troy ounce 2 

Weighted 



Range 



average 



Total capital plus 
operating cost per troy ounce 
Weighted 



Range 



average 



Break-even cost 
or price level 3 

Weighted 



Range 



average 



South Africa 
United States' 

Canada* 

Australia 



Underground 

Surface 

Underground 
Underground 
Surface 



$7 -$95 
21-126 
22-136 
44-132 
NAp 



$52 
47 
62 
73 
48 



$123 -$488 $247 

117- 401 271 

93- 526 202 

148- 314 222 

240- 310 291 



$145 -$559 $299 

152- 527 318 

134- 598 264 

192- 444 295 

290-360 339 



$148 -$573 
173- 538 
134- 598 
200- 477 
325- 365 



'$285 
354 
292 
310 
353 



NAp Not applicable. 

'Unrecovered capital investment in mine and and mill plant and equipment, infrastructure, and development remaining as of Jan 1984 and reinvestments through life of operation. 
H'otal mining plus milling cost per troy ounce of recovered gold. 

3 The break-even cost or price level is that point where long-run total production cost per ounce = required price per ounce at 0-pct DCFROR 
'The break-even cost estimate is lower than the total capital plus operating cost estimate owing to the influence of byproduct credits for uranium. 
Underground cost data for the 1 mine in this category were withheld to avoid disclosing possible proprietary data. 

'Includes 3 Hemlo District operations currently in late stages of development, which will be among the lowest cost world producers and represent 44 pet of total recoverable gold analyzed in 
Canada. Surface mining is insignificant. 



11 



to higher grades, the capital costs on a per ounce basis at 
underground mines represent only a small part of total pro- 
duction costs. 

Long-run operating costs 5 (mining plus processing) per 
ounce of recovered gold actually favor underground min- 
ing in general. This is due again to generally higher grades 
and higher mill recoveries at underground mines. In the 
case of South Africa, the weighted-average cost estimates 
are dominated by a number of very large mines which have 
excellent scale economies. For Canada, the overall estimate 
is dominated by the 3 new mines in the Hemlo District, 
which will rank among the 10 lowest gold mines in the 
world. 

It is important to stress that this analysis is comparing 
long-run total production costs per ounce of recovered gold. 
If one looks only at direct operating costs or current total 
production costs, the results of this type of comparison would 
possibly be different, but from a long-term availability 
perspective, which is cognizant of current and future capital 
and operating costs and which expresses those costs on a 
recovered-gold basis, the results favor underground mining. 

A final comparison of long-run break -even total produc- 
tion costs demonstrates that all four of these major gold pro- 
ducing MEC's have, on average, gold mining industries that 
are economic at long-run prices similar to those that have 
prevailed in recent years. However, if prices remain in- 
definitely below $350 tr oz to $400/tr oz many individual 
mines and new mine developments will become uneconomic. 

POTENTIAL ANNUAL PRODUCTION 
THROUGH 2000 

This section is intended to provide a general overview 
of annual production potential for the 111 evaluated 
primary operations relative to production cost levels and 
country distribution. The individual country chapters pro- 
vide general assessments of the production potential of each 
nation through the end of this century. These chapters deal 
with all sources of gold production, including byproduct pro- 
duction from base metal mines. A number of country-specific 
issues that will undoubtedly impact upon each nation's 
future production potential (primary and byproduct) are also 
dealt with separately in the individual country chapters. 

Figure 6 plots annual production potential through the 
year 2000 at increasing cost levels. The major conclusions 
of the analysis are— 

1. Total gold production from the 111 evaluated opera- 
tions is not expected to decline significantly during the re- 
mainder of this century even with no major additions to 
demonstrated resources. Production in the year 2000 is ex- 
pected to be only 9 pet below the level for 1984, given con- 
stant 1984 prices exceeding $300/tr oz, owing primarily to 
a maintenance of production by South African mines. This 
assumes that market forces are the only factors at play. 
Clearly, political, social, or military turmoil could greatly 
change this scenario. 

2. In any given year, it is expected that more than 80 
pet of total production will emanate from operations with 
long-run total production costs of $400/tr oz or less. 

3. Because of the relative importance of surface mines 
in the United States and Australia, both countries must con- 
tinuously replace a portion of their demonstrated resource 
base to maintain current primary gold production levels. 



Current demonstrated resources at most mines are suffi- 
cient for only 5 to 10 yr of production. Both nations have 
experienced tremendous exploration and development ac- 
tivity in recent years, which has served to increase annual 
output. Over the long term, however, the main issue will 
be one of production maintenance rather than production 
enlargement. Exploration, development, and production 
economics in these two nations have come to favor produc- 
tion maintenance by surface minable resources. 

4. Canadian primary gold production potential through 
the turn of the century should also remain relatively con- 
stant due to the development of the Hemlo gold district. This 
district is expected to increase annual output by at least 
700,000 tr oz/yr by the end of the 1980's, which would off- 
set projected declines from other mines. The three mines 
have initial demonstrated resources sufficient for at least 
20 yr of production at full capacity, beginning in 1986. 




o-$zoo 



Figure 6. — Potential annual gold production to the year 
2000 from 111 primary operations. 

Figure 7 continues this discussion by plotting potential 
annual output through the year 2025. The major point to 
be made is that total annual gold production may decline 
very rapidly after the turn of the century unless major new 
discoveries are made and new mine development continues. 
A discussion of the potential for new discoveries of major 
goldfields is beyond the scope of this study, but it is clear 
that new demonstrated resources must be added to replace 
the eventual depletion of the Witwatersrand Basin of South 
Africa during the next 30 yr, or world gold production may 
decline very significantly. To replace a projected decline in 
South African output of 7.6 million tr oz/yr during 
1990-2010 would require the development of at least 26 
mines with annual production capacities of 290,000 tr oz/yr 
(the size of the Golden Giant Mine at Hemlo) or the develop- 
ment of at least 45 mines with annual production capacities 
of 170,000 tr oz/yr (the size of the new El Indio Mine in 
Chile). This, clearly, is the challenge facing the MEC gold 
mining industry. 




2004 2009 



The appendix contains the definition of operating costs as employed in 
this study. 



Figure 7. — Potential annual gold production to the year 
2026 from 111 primary operations. 



12 



REPUBLIC OF SOUTH AFRICA 



It is estimated that roughly 40 pet of all the gold ever 
mined in the MEC's has been produced by South African 
operations. There is continued concern that this immense 
productive capacity will begin to decline soon, causing a 
reduction not only in world gold supply but also in the abili- 
ty of the MEC's to exert the major influence upon the world 
gold market. 

To address the current and future importance and poten- 
tial of South African mines, it is necessary to place historical 
production and economic developments into perspective. In 
so doing, the current 1984 "snapshot" of the industry is 
placed in its proper perspective and a more precise indica- 
tion of future production potential is possible. 



HISTORICAL PERSPECTIVE 

Of the five countries that have produced the majority 
of the gold mined throughout history (South Africa, the 
Soviet Union, the United States, Canada, and Australia), 
South Africa's gold mining industry is the youngest. Gold 
was first discovered in 1872 at Pilgrim's Rest in the Eastern 
Transvaal. Two other major discoveries were made in the 
Eastern Transvaal at Kaapsche Hoop in 1874 and at 
Barberton in the early 1880's. Production of gold in South 
Africa did not reach a large scale until the discovery of the 
Witwatersrand Basin gold deposits in the mid-1880's. Two 
landmarks in the history of Witwatersrand Basin gold min- 
ing occurred in 1885, when the first crushing of con- 
glomeritic gold ore occurred, and in 1886, when the Main 
Reef Leader was found and tested by George Walker and 



George Harrison (5, p. 39). 6 These developments are typical- 
ly referred to as the official start of gold production from 
the Witwatersrand Basin gold deposits. From 1886 onward, 
the Witwatersrand Basin gold deposits have accounted for 
the vast majority of South African gold production and have 
proven to be the largest single source of gold the world has 
ever known. 

From 1886 to 1930, exploration and production in the 
Witwatersrand Basin concentrated on the Central, East, 
and West Rand areas (fig. 8), in an arc from the city of Rand- 
fontein, 30 km northwest of Johannesburg, to the city of 
Nigel, 50 km southeast of Johannesburg. During this period, 
there was some cursory exploration and production from 
other areas as far west as the vicinity of Klerksdorp, but 
the activity was sporadic and on a small scale (5, p. 39). 

In 1932, the Republic of South Africa went off the of- 
ficial world gold standard. This economic move provided a 
major incentive for renewed exploration for gold in the Wit- 
watersrand Basin. In addition, a technologic advance oc- 
curred in 1934 with one of the first uses of a magnetometer 
to discover gold-bearing reefs on the West Wits Line, also re- 
ferred to as the Far West Rand, located southwest of Rand- 
fontein. At about the same time, the discovery of the Vaal 
Reefs Mine in the Klerksdorp area rejuvenated gold pro- 
duction in that particular goldfield (fig. 9). 

It was not until the late 1940's and early 1950's that 
the Orange Free State Goldfield was discovered and 
development began. The last of the major goldfields to be 
brought into production in the Witwatersrand Basin was 



"Italicized numbers in parentheses refer to items in the list of references 
preceding the appendix at the end of this report. 




E. T RANSVAAL 



WEST CENTRAL 
RANO RANO 
FAR WEST , r tl^L 



SEE DETAILED MAPS 

OF GOLDFIELDS 

(FIGS. 9-10) 





SOUTH AFRICA 





J 
> 




0.' 





LEGEND 
E. TRANSVAAL GOLD MINES 

1 E.T. Consolidated 
(Agnes, New Consort, Sheba) 

2 Fair-view 



200 

J 




Scow, Km MAP LOCATION 

Figure 8.— GoMf iekte of the Wttwatersrand Basin, South 
Africa. 



13 




heunissen 



LEGEND 

ORANGE FREE STATE 

1 Loraine ( Allanndge) 

2 Free Stare Geduld 

3 WesTern Holdings Complex 
a-Werrern Holdings 
b-Weikom 

e-Free Stare Saaiplaas 
d- Erfdeel-DanKboarneid 

4 Harmony 

5 Bearrix 

6 Presidenr Sreyn -Video 

7 President Brand 

8 Unisel 

9 St. Helena 

* Joint Metallurgical Scheme 
( mills on several of Tfieaoove 
properties) 

KLERKSOORP GCLDFIELD 

10 Hartbeesttontein 

I i Vaal Reers 

12 Butfelstontein 

13 Sriitonrem 



Areas are planned extensions 
tor aevelopmenr Beyond 1984 
(Plans circa 1981-84) 



h — >— t- Railroads 



Scoit.nm 



Figure 9. — Gold mining operations of the Orange Free 
State and Kiarfcsdorp Qotdftslds. 



the Evander Goldfield, about 110 km southeast of Johan- 
nesburg, which was discovered and developed in the late 
1950's and early 1960's (fig. 10). All new gold production 
since the mid-1960's has come from the development of 
down-dip or on-strike extensions of reefs being mined or 
from the mining of additional reefs on lease areas covered 
by the existing operations. 

Figure 11 shows annual gold ore and refined gold pro- 
duction in South Africa from 1970 through 1983. Table 10 
contains data on average annual gold ore and refined gold 
production for each 5-yr periods from 1885 through 1979 
and annually from 1980 through 1983. Over this 99-yr 
history of gold production, South Africa has produced about 
1.247 billion tr oz gold from the milling of about 4.062 
billion mt ore, which gives an indicated recoverable gold 
grade for the entire 99-yr period of 9.5 g/mt milled. This 
total production of 1.247 billion tr oz probably represents 
about 40 pet of all gold ever produced in the MEC's, and 
it is most likely that at least 95 pet of South Africa's pro- 
duction has come from Witwatersrand Basin gold deposits. 

In the 99-yr history of gold production in South Africa, 
43.2 pet of total gold production came in the first 70 yr and 
56.8 pet in the period 1955-83. The recoverable gold grade 
for the first 70 yr was about 9.1 g/mt ore milled, compared 



with 9.9 g/mt ore milled for 1955-83. This increase was 
primarily due to the high-grade Orange Free State mines, 
which were brought into production in the early 1950's. 

Average annual production of gold remained fairly 
stable in South Africa from 1910 through 1954. Average 
annual gold production for the 5-yr periods during this time 
ranged from 8.4 million tr oz during 1920-24 to 13.5 million 
tr oz for 1940-44. It was only in 1955-70 that gold produc- 
tion in South Africa soared, with the average annual gold 
production for the 5-yr periods increasing from 12 million 
tr oz during 1950-54 to 30.8 million tr oz for 1965-69. This 
increase was mostly due to the milling of higher grade ore, 
although the average annual milled ore tonnage also in- 
creased from about 57 million mt in 1950-54 to nearly 75 
million mt for 1965-69. The increase in the grade of ore 
milled is shown by the near doubling of the indicated 
recoverable gold grade from 6.6 g/mt milled during 1950-54 
to 12.8 g/mt milled during 1965-69. Again, the major fac- 
tor in this increase was the discovery and development of 
the high-grade Orange Free State deposits. 

Another factor was the profitability squeeze due to ris- 
ing working costs and a static gold price. This caused the 
mines to increase the average grade of mill feed. This 
squeeze was alleviated by freeing the price of gold complete- 



14 



1 
1 






J^Pretorio 








n. WEST RAND 


Johannesburg 


f EAST RANO 














/ V*94 / 








h*f ^^* 












Jj J^* 


yC*Q53 ?■ 




'iT*-^ 




FAR WEST RAND 


/'•V CVV A. 

//Sr f^^ \ 


CENTRAL RANDNk 




^ ^ 




j)*^*** ^^ ,4 1 








V 






/*°| ^* \ 
















> *°< 




tvANPtn 



FAR WEST RAND GOIDFIELD 

14 Dreifontein Consolidated 
(East -West -North Dreitontein) 

15 Western Deep Levels 

16 Blyvcoruitzlcht 

17 Doomfontein 
16 Elandsrand 

19 DeelKroal 

WEST RANDGOLDFIELD 

20 Kloof 

21 Libonon 

22 Ventersposl 

23 Western Areas 
240,24b Rondfontein Estates 
• Egoli Contolidated (taking 

• lime» from Rondfontein Estates) 
25 West Rand Consolidated 



LEGEND 



CENTRA L RAND GOLDFIELD 

26 Durban Roodepoort Deep 

27 RMMM Slimes Project 

(Old Ciown Mines Property) 

28 Simmer and Jack 

29 Village Main Reet 
EAST_R AND 601 DFIELD 

30 Witwatertrand Nigel 

31 Morlevale 

32 Grootvlel 

33 East Rand Proprietory 

34 Consolidated Moddeiforrtein 

35 Ergo 

36 Egoli Consolidated 



EVANDER GOLDFIELD 

37 Winkelhaak 

38 Bracken 

39 Leslie 

40 Kinross 



Areos ore planned extensions 
for development beyond 1984 
(Plans circa 1981-84) 



4 — t— f- Railroads 



L 



Figure 10. — QoM mining operations of the Far West 
Rand, West Rand, Central Rand, East Rand, and Evander 
QoMfieids. 



llo r 



us I00 

o 



LU 

or 

o 90 

Q 
LU 



80- 



70 





I 


I I I 


I I I I I I 1 1 








/ 

/ 

/ 
/ 
/ 
















_- - " 




















j 


-J I I 


1 1 1 It 1 ..!_ 



40 

N 


l . I I • 


1 1 i i i r— 


i 


O 


' 






£ 30 


" — — -^___ 




- 


O 


^~\__ 






-J 20 


. 






O 








C3 

in 


I i i i i 


i i i i ...... i. __. i ._ 


i 



1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 

Figure 11. — Gold ore and refined gold production in 
South Africa, 1070-83. 



Table) 10.— South African flo4d ora and gold production, 1885-1083 



15 



Time ponod 



Ore millad 
10 J ml 



Toial production during 
Syr period 

Gold produced, 



10 1 ii oz 



Average annual 


production 


during year or period 


Ore milled. 


Gold produced. 


\0> ml 


10' tr oi 


NA 


126 


NA 


1,059 


4.856 


2.850 


NA 


1.814 


14.333 


6.302 


22.983 


8417 


24.884 


8.832 


22.766 


8.404 


27.720 


10.088 


32.631 


10.929 


48.396 


11,766 


60.245 


13.533 


53.371 


11.728 


56.839 


12.029 


63.426 


17.050 


71.394 


25.272 


74.886 


30.868 


76.777 


28.936 


79.794 


22.728 


89.915 


21,704 


90.000 


20.446 


100.000 


21.348 


105.000 


21.863 



Indicated average 


annual recovery grade 


g/mt 


NA 


NA 


182 


NA 


137 


11.4 


11.0 


11 5 


11 3 


104 


75 


70 


68 


66 


84 


11.0 


128 


11 7 


88 


75 


70 


66 


65 



1885-89 

1890-94 

1895-99 

1900-04 

1905-08 

1910-14 

1915-19 

1920-24 

1925-29 

1930-34 

1935-39 

1940-44 

1945-49 

1950-54 

1955-59 

1960-64 

1965-69 

1970-74- 

1975-79 

1980 

1981 

1982 

1963 



NA 

NA 

24.280 

NA 

71.664 

114 914 

124.422 

113.831 

138.600 

163.156 

241.980 

301.227 

266 853 

284.194 

317.131 

356.968 

374.429 

383.887 

398.970 

NAp 

NAP 

NAp 

NAp 



631 

5.293 

14.248 

9.068 

31.508 

42.086 

44 162 

42.021 

50.441 

54.046 

58.828 

67.665 

58.642 

60.147 

85.251 

126.360 

154.342 

144.681 

113.641 

NAP 

NAp 

NAp 

NAp 



Total or average 



4.062.000 



1.247,258 



41.025 



NA No) available NAp Not appfeceote 'Last period ol no slimes reprocessing 
Source Relerence 6 

ly in the early 1970's. This development led to two trends 
during the 1970's at South African gold operations. First, 
the higher level of prices allowed the mill feed grades to 
be lowered to attain the same or higher level of revenues. 
Second, the higher prices led to reevaluations of the 
economics both of low-grade underground resources and of 
retreating low-grade tailings dumps for gold and uranium 
recovery. Thus, by 1975-79, the average recoverable gold 
grade had decreased from 12.8 g/mt milled in 1965-69 to 
about 8.8 g/mt milled. This recoverable grade was still about 
33 pet higher than the recoverable gold grade being ex- 
perienced in 1950-54. 

As a first point of reference for the discussion that 
follows, 21.8 million tr oz gold was produced from 105 
million mt ore milled in 1983, for an indicated recovery 
grade of 6.5 g/mt. These data do not include any of the ma- 
jor operations that produce gold solely from the retreatment 
of low-grade sand and slimes dumps but do include the 38 
major operations producing gold primarily from under- 
ground mining plus several smaller underground operations 
that are not members of the Chamber of Mines. 

As a second point of reference, this study estimates that 
as of January 1984, a total demonstrated resource of 5 
billion mt material is available for milling at 38 primarily 
underground operations and 6 entirely surface dump 
retreatment operations. This 5 billion mt of demonstrated 
resource contains an estimated 716 million tr oz recoverable 
gold at an estimated overall recovery grade of 4.4 g/mt 
milled. Comparatively, for the 99 yr from 1885 through 
1983, 4.062 billion mt ore was milled to produce 1.247 
billion tr oz gold at an indicated recovery grade of 9.5 g/mt. 
Thus, as of 1984, about 57 pet as much gold as was produc- 
ed in South Africa over the last 99 yr should still be 
available for future production from about 125 pet as much 
total feed material. The overall recoverable gold grade of 
7.3 g/mt for the remaining underground resource as of 1984 
is about 25 pet less than the historical recoverable gold 
grades. 



RESOURCE OVERVIEW, 1084 

In South Africa, the Chamber of Mines, the mining 
houses, and individual companies provide detailed informa- 



tion on an annual and quarterly basis. The major complica- 
tions in South African gold "reserve" assessments occur 
because a typical Witwatersrand gold mine makes regular 
assessments of four different categories of available ton- 
nages and grades. The four categories, with definitions 
paraphrased from reference (7) follow: 

Proved reserve — This is the material tonnage and grade 
that are reported in the annual reports. In reliability and 
availability this is the highest of the three "reserve" 
categories in that the ore has been fully exposed by develop- 
ment and/or stoping and has been blocked out and sam- 
pled. If not immediately ready for mining, it will be 
available within 6 months to a year, at most. 

Probable reserve — This material is that contained 
within a zone of mineralization to which the sampling 
values of the proved reserve are believed to apply, although 
with less certainty. The extent of this zone is fixed arbitrari- 
ly from local knowledge and experience, using the sampl- 
ing results from any boreholes that have penetrated the 
zone. This tonnage is termed the probable and "partly pro- 
ved" reserve. 

Possible reserve — Also known as prospective ore, this 
is material that is an extension of the ore body or is a new 
ore body that is beyond the zones of the proved and probable 
reserves. Its estimated tonnage and value are less certain 
as sampling information is meager. In the case of new, 
undeveloped, and deep gold mines, the possible reserve is 
assessed from deep borings put down on the strength of the 
geophysical prospecting program. The proved and probable 
categories mentioned above will only be figured later as 
development opens up the new mine underground. 

Life-of-mine-reserve8 — This is an estimate of the total 
tonnage of ore in the mine, both payable and unpayable, 
and basically represents the summation of the three 
categories described above. This estimate forms the basis 
of all detailed long-term forecasts (more than 5 yr into the 
future), which are required periodically for determination 
of development schemes at producing operations and at 
undeveloped mines. 

The life-of-mine-reserve8 category measures the long- 
term potential of a South African gold mine in the Wit- 
watersrand Basin. It is the category estimated in this study. 
There are several ways to estimate this tonnage, and all 
are described very well in Storrar's book (7). The methods 



16 



Table 11. — 1984 demonstrated gold resources in South Africa and comparison to past production 



..... . . Weighted-average 

Miiiapie g0 | d grac j e g/ mt Contained gold, Recoverable gold, 

Resource material, » S S lOMroz io<Mr oz 

1U mt Mill teed Recoverable 

1885-1983, underground 4,061 10J) 9jj 1,306 1,247 

1984 demonstrated: 

Underground' 2,988 7.7 7.3 739 702 

Surface* 2,077 .29 .21 19 14 

Total or average 5,065 4.7 4.4 758 716 

'Contained in 38 major underground mining operations. 

Represents tailings material being reprocessed at 10 major underground operations as part of their overall production plus 6 solely surface reprocessing 
operations. 

vary basically in the mathematical and statistical tech- ties, the reefs have been subjected to local faulting, which 
niques used. All of the methods must include a detailed plan can cause losses of 20 to 30 pet of the available tonnage, 
view of the mine and adjacent properties, some cross- The life-of-mine reserve estimate of this study is con- 
sectional plans, and as much historical data on past and sidered as equivalent to the demonstrated resource category 
present development results, borehole samplings, and ore and is presented in table 11 along with a comparison of the 
production as possible. With these data, the probable area, estimate for the past production values from 1885 through 
mining width, and grade over the mining width are careful- 1983. 

ly examined, and an assessment is made of the total ton- As shown in table 11, the 1984 demonstrated resource 

nage and value of the ore in the mine. for the 44 evaluated South African gold mining operations 

The life-of-mine reserve assessments made in this study totals 5.065 billion mt. It includes 2.988 billion mt 

are based solely on publicly available data, most of them underground material on a mill feed basis and 2.077 billion 

from the annual reports of the mining companies. The type mt old surface mine dumps and mill tailings dam material, 

of detailed data and factors that would be available to the The underground ore has an overall weighted-average mill 

mining company owning the property were not accessible feed grade of 7.7 g/mt and a recovery grade of 7.3 g/mt, while 

for this study. Still, it is felt that the estimates should be the surface reclamation material grades an extremely low 

within ±25 pet of actual tonnages and grades that will 0.29 g/mt contained and 0.21 g/mt recoverable gold. Total 

result from mining. These results, in many cases, will not contained gold is estimated at 758 million tr oz grading 4.7 

be known until well into the 21st century and could be g/mt overall. At an average recovery of 94 pet, total 

significantly affected by changes in the price of gold from recoverable gold is estimated at 716 million tr oz. Of this 

the price ranges being experienced in the early 1980's. An total, 98 pet is available from underground ore and 2 pet 

unpublished South African Minerals Bureau estimate of from surface reclamation sites. 

total life-of-mine reserves for all South African gold mines The total demonstrated resource estimate for each 

is within ± 15 pet of that presented herein. operation takes into consideration such factors as current 

Three major factors affect an assessment of Witwaters- capital expansions, ongoing development plans, and min- 

rand Basin gold reserves. They are discussed separately as ing lease applications in order to estimate the total amount 

follows: of gold potentially recoverable from each operation. The 

Pay limit — The pay limit is the lowest grade of total estimate for the underground resource covers only 

recoverable gold needed in a certain defined tonnage to those reefs under production or announced for planned pro- 

economically recover the gold in that tonnage at gold prices duction as of 1981. The estimate does not include any reef 

prevalent at the time. Pay limits vary from mine to mine material grading less than 2.5 g/mt or reefs present on 

and from reef to reef and change from year to year. The pay holdings under exploration lease. 

limit is an important concept in determination of the an- A few underground operations mined reef material that 
nual "proved reserve" reported. In 1980, the "norm" for graded as low as 2.5 g/mt during 1981-82; however, this 
the South African gold mining operations was between 2 low-grade underground material was supplemental mill 
and 3 g/mt ore, the lowest in history, owing to the extremely feed for the main ore source(s), which were usually relative- 
high gold prices being received. In a general sense, this ly high-grade material. This study estimates that 
study involves a pay limit of 2.5 g/mt ore since no reef underground material grading 2.5 g/mt or less cannot be 
material below that grade was proposed for mining in the produced economically at the price levels of the early 1980's. 
underground operations analyzed. Historically, production has come from numerous reefs 

Gold Distribution — In Witwatersrand Basin gold in the Witwatersrand Basin. Nearly all of these productive 
deposits, the gold particles occur in hard, abrasive pebble reefs occur in what is referred to as the Witwatersrand 
conglomerates referred to as reefs. The reefs generally have Triad, which involves, collectively, three separate geological 
a tabular shape, with long extensions along strike and down systems — the Dominion Reef System, the Witwatersrand 
dip. Because of channeling, the grades of gold vary from System, and the Venter sdorp System. The majority of pro- 
area to area within the same reef on the same mining prop- duction has come from seven individual reefs or reef groups 
erty and from property to property. Thus, development and which also contain 97 pet of the total underground 
borehole samplings are based on varying sampling widths, demonstrated resource of this study, 
and any estimation of reserve or resource potential must Table 12 lists all nine reefs or reef groups comprising 
adjust these sampling results to an expected or assumed this study's 1984 demonstrated resource estimate along 
mining width. with information on the total tonnage and grade range 

Structural factors — The gold-bearing reefs in the Wit- estimates for the reefs or reef groups, by gold mining field, 

watersrand Basin have wide variations in the degree of dip All nine of these reefs are located in the upper division of 

attitudes, ranging from 10 ° to nearly 30 °. At many proper- the Witwatersrand System or in the lower portion of the 



17 



Tabla 12.— Distribution el damonatratod gold raaotircea In South Africa, by roof or roof group and by gold mining Hold 





Total underground 
demonstrated resource 






Number ol producers mining reel or reel group 








Total 


East 
Rand 


Far 
Central West West Klerksdorp 
Rand Rand Rand 


OFS 






Tonnage. Feed grade 
10* mt range, g/mt 


E vender 



Kimberry Reel 
Ca'Nn leader Reef 
Basal Reel 
leade- Reel 

md Souln Reels 
Vaal Reel 
Ve-»-sdorp Contact Reel 

and Etsourg Reels 
"A " and B Reels ol 

- : 
Ma'n Ree' Leader. 

Black Reel and 

Midd»e Reel ol OFS 
Total r> average 

NM Not meaningful 



245 
206 
611 
278 
375 
391 

790 

82 



30- 73 
94-186 
62-11 4 
25-35 
35- 70 
90-11 

35-148 

4 3- 7 8 

4 6-11 1 



11 
4 
9 
7 
i 
4 



00 

H 

in 
O 
o 



bUU 
500 


1 1 1 r- 


1 1 1 

; ■ 


400 


- 


_f 


300 


- 


^ : 


2O0 


-_ f ~ r^~~^ 


100 


1 l 1 l 


i . i 



100 



700 



200 300 400 500 600 

TOTAL RECOVERABLE GOLD, I0 6 tr oz 

Figure 12.— Potential total South African gold avaUablo 
at broak-owon coats of production as of January 1984. 



800 



Ventersdorp System. Feed grades range from 2.5 g/mt 
milled tol8.6 g/mt milled. The Leader Reef in the Orange 
Free State Goldfield has the lowest grade range, 2.5 to 3.5 
g/mt; thus, it is milled along with the relatively high-grade 
Basal Reef materials grading 6.2 to 11.4 g/mt. The Carbon 
Leader Reef in the Far West Rand Goldfield, at 9.4 to 18.6 
g mt, and the Vaal Reef in the Klerksdorp Goldfield, at 9.0 
to 11.0 g mt, are the highest grade reefs. In terms of 
distribution among the various goldfields, the Main and 
South Reef groups, the Kimberly Reef, and the VCR- 
Elsburg Reef group are the most common, all being present 
in four of the seven goldfields. 

TOTAL AVAILABLE GOLD FROM 
PRODUCING SOUTH AFRICAN MINES 

The 44 largest primary gold producing operations, ac- 
counting for 97 pet of total 1983 production, were evaluated. 
These operations are listed in table 1. 

Total refined gold potentially recoverable from all opera- 
tions is estimated at 716 million tr oz: 702 million tr oz from 
underground mines and 14 million tr oz from surface opera- 
tions. This represents approximately 16 yr of total world 
production or 32 yr of South African production at 1984 
levels. 

Figure 12 shows the total amount of refined gold 
cumulatively available at increasing cost levels from all 44 
evaluated operations. 



In January 1984 dollars, long-term break-even produc- 
tion costs (as defined in the appendix) range from $148/tr 
oz to $573/tr oz. Seventy-three percent of potentially 
available refined gold is recoverable at a cost level of $300/tr 
oz or less, 85 pet is recoverable at $400/tr oz or less, and 
more than 94 pet is recoverable at $500/tr oz or less. The 
price of gold averaged $425/tr oz in 1983, which indicates 
that the great majority of South African gold resources are 
economic. This average 1983 price is lower than the $459 
average price recorded in 1981 and markedly lower than 
the $612 average recorded for 1980, but it still represents 
a 334-pct increase over average 1973 prices. These high 
prices are responsible for the ambitious development and 
expansion plans that were announced in 1980-82 in South 
Africa and which have been incorporated into this analysis. 

Table 13 shows the total amount of refined gold 
cumulatively available at increasing cost levels from the 
38 underground mines. The weighted average long-term 
cost of refined gold production for all 38 underground mines 
is estimated at $285/tr oz. The lowest cost underground 
mine is estimated at $148/tr oz. This weighted average 
reflects the influence of a number of exceptionally large and 
profitable mines. Seven of these 38 underground mines, for 
example, are estimated to each contain in excess of 40 
million tr oz recoverable gold, and an additional 5 
underground mines are estimated to each contain in excess 
of 20 million tr oz recoverable gold. For the six low-grade 



18 



Table 1 3 — Total gold potentially available at 

increasing cost or price levels from 38 underground 

operations in South Africa 



Gold cost or 
price level, 
per troy 
ounce 

$200 

$300 

$400 

$500 

Over $500 . 



Break-even DCFROR 



Available gold, 

10 6 tr oz 

(cumulative) 



Number 

of mines 

(cumulative) 



10-pct DCFROR 



Available gold, 

10 6 tr oz 

(cumulative) 



Number 

of mines 

(cumulative) 



143.2 
515.8 
600.2 
664.1 
701.7 



3 
21 
28 
36 
38 



51.7 
450.0 
600.2 
661.4 
701.7 



2 
17 
28 
34 
38 



sand and slimes dump reprocessing operations, the weighted 
average long-term break-even cost is estimated at $335/tr 
oz refined gold. 

The overriding importance of a small number of large 
underground South African mines is demonstrated by the 
data of table 14. The 10 largest mines in terms of total 
recoverable gold account for 481 million tr oz. This is 67 
pet of total South African gold and 59 pet of evaluated total 
MEC recoverable gold. The long-term break-even unit cost 
of these 10 mines ranges from $148/tr oz to $509/tr oz with 
a weighted average of $273. 

Table 14. — Ten largest South African operations in 
terms of total recoverable gold 1 

Operation name Ownership 

Dreifontein Consolidated Gold Fields. 

Vaal Reefs Anglo American. 

Western Deep Levels Do. 

Free State Geduld Do. 

Kloof Gold Fields. 

Western Holdings Complex Consortium of 4 owners. 

Randfontein Estates Johannesburg Consolidated. 

East Rand Proprietary Barlow Rand. 

President Steyn-Video Anglo American. 

Harmony Barlow Rand. 

1 Total recoverable gold = 481 million tr oz: 

Percent of South African gold = 67. 

Percent of market economy country gold = 59. 
Long-run total unit cost: 

Range = $148 to $509. 

Weighted average = $273. 

As shown in table 15, 9 of these underground operations 
are also listed among the 10 largest average annual pro- 
ducers on a life-of-mine basis. The 10 operations in table 
15 account for approximately 55 pet of expected average an- 
nual South African production during the 1984-90 period 
and for approximately 45 pet of expected average annual 
MEC production from the 111 evaluated operations during 
this same period. The ownership of this large annual pro- 
ductive capacity and total recoverable gold is concentrated 
in five of the large mining houses in South Africa. Given 
that these mining houses own other mines both inside and 
outside South Africa, they represent a large percentage of 
world gold ownership and supply as well. 

In table 16, the 10 lowest cost underground producers 
are listed according to this study's estimate of long-run total 
break-even unit cost. Four of the 10 operations contained 
in this listing are also among the 10 largest annual life-of- 
mine producers. All 10 of these operations have long-term 
break-even unit costs below $250/tr oz. 

Given South Africa's current dominant production posi- 
tion and its very large quantity of total and annual gold 
available at relatively low break-even cost levels, it would 
appear that its industry currently establishes the minimum 
floor price of newly mined gold. This means only that free 
market gold prices could not remain below this average 
South African cost level for long without causing either ma- 



Table 15. — Ten largest South African operations in 
terms of average annual Iff e-of -mine production 1 

Operation Name Ownership 

Dreifontein Consolidated Gold Fields. 

Vaal Reefs Anglo American. 

Western Deep Levels Do. 

Randfontein Estates Johannesburg. 

Free State Geduld Anglo American. 

Western Holdings Complex Consortium of 4 owners. 

Harmony Barlow Rand. 

Kloof Gold Fields. 

Buffelsfontein 2 Gencor. 

President Steyn-Video Anglo American. 

1 Total average annual output = 12.8 million tr oz. 
Percent of average annual South African production (1984-90) = 55. 
Percent of average annual production from 111 operations (1984-90) = 45. 

2 Only operation not on 1 largest recoverable gold list. 

Table 16. — Ten lowest cost producers in terms of 
long-run total break-even production cost 

Cost level 
Operation name per troy ounce 

Kloof 1 Less than $210. 

Kinross Do. 

Dreifontein Consolidated 1 Do. 

Winkelhaak Do. 

Blyvooruitzicht Do. 

Buffelsfontein 1 Less than $250 

Unisel Do. 

E. T. Consolidated Do. 

Western Deep Levels 1 Do. 

Doornfontein Do. 

1 Among the 10 largest average annual life-of-mine producers. 

jor contractions in world supply of newly mined gold or large 
South African Government assistance payments to keep 
that nation's gold mines operating. The two mines with 
long-run unit costs estimated to be above $500/tr oz (table 
13) have long received state assistance. It is important to 
stress, however, that the gold mines of South Africa are not 
state owned and are profit motivated. In this regard, the 
analyses at the 10-pct profitability level determined long- 
run total costs ranging from $157/tr oz to $618/tr oz, with 
a weighted average for all underground mines of $302/tr oz. 

Economic Effect of Byproduct Production 

Many of the operations produce other mineral products 
in association with gold. The most notable is uranium; 
silver, pyrite concentrates, and sulfuric acid are also pro- 
duced. Silver production for all operations is a byproduct 
of primary gold production. Revenue generated from silver 
production is insignificant, generally less than 1 or 2 pet 
of the total. The total amount of silver recoverable along 
with the gold from 42 operations is estimated at approx- 
imately 67 million tr oz. Eighteen operations contain less 
than 500,000 tr oz silver, and 18 contain over 1 million. Only 
eight operations are estimated to have average annual pro- 
duction levels exceeding 100,000 tr oz silver contained in 
total annual dore bullion production. 

Most South African uranium production is a byproduct 
of gold production. In contrast to the situation for gold, data 
relating to contract prices and production are difficult to 
obtain. Of the underground operations that produce 
uranium, six produce enough (or contain enough) that the 
overall economics of the operation are affected by potential 
uranium revenues. In only two cases, however, is it felt that 
uranium revenues are essential to the economic com- 
petitiveness of the operation. During 1984, four operations 
announced their intention to cease byproduct uranium pro- 



19 



duction. One of these operations is converting its uranium 
plant to a gold treatment plant, and at least one other opera- 
tion is considering doing the same. 

A portion of total uranium production is derived from 
primary uranium mines. One of these has decided to close 
down indefinitely, and two have converted to become 
primary gold producers (8, pp. 296-2971 The current 
uranium market situation is quite poor, as is reflected in 
the conversions occurring in 1983 and 1984. It can be ex- 
pected that a certain level of uranium production will be 
maintained owing to political consideration of the South 
African Government. 

Capital and Operating Costs 

Underground gold mining in South Africa is somewhat 
anomalous in that it is both highly labor intensive and re- 
quires high levels of capital investments and reinvestments. 
Data on capital and operating costs as estimated in this 
study are included in table 17. Total capital investments 
and reinvestments over the estimated remaining mine lives 
range from $15 million to $3.8 billion per operation. 



Table 17. — Economic summary data for 38 
underground gold mines in South Africa 



Range 



Total or 
weighted average 



Operational data: 
Average annual 

output 10 3 tr oz. 

Total recoverable 

gold' 10* tr oz 

Producing years from 
January 1984 
Caprtal and operating 
cost data 
Total capital 

investment* I0*dollars 
Annual capital 

II . estment do 

Capital cost per troy 

ounce 
Operating cost per troy 

ounce 3 
Total operating plus 
capital cost 
per troy ounce 
Long-run total cost per troy 

Break-even 

(0-pct DCFROR) 
10-pct DCFROR 



30-2.100 21.000 

670-91.450 702 

6-63 NAp 



Si 5- S3. 835 
S1-S98 
S7-S95 

S123-S488 

S145-S599 



S148-S573 
S157-S618 



S33.150 

NAp 

S52 

S247 

S299 



<S285 
S302 



NAp Not applicable 

-ed gold estimated to be recoverable as of Jan 1984 
'Unrecovered capital investment in mine and mill plant and equipment, 
infrastructure, and development remaining as of Jan 1984 and reinvestments 
through life of operation 

~g plus milling cost per troy ounce of refined gold 
'Less than total operating plus capital cost owing to influence of byproduct 
cred ni 

Thirteen operations will require between $500 million and 
$1.0 billion in total capital investments, eight will require 
in excess of $1.0 billion, and four will require in excess of 
$3.0 billion of investments over their estimated remaining 
mine lives. 

On an annual life-of-mine basis, total capital rein- 
vestments are estimated to range between $1.0 million and 
$98.0 million with 50 pet of the operations in the $10.0 to 
$50.0 million range. South African tax law allows for the 
expensing d-yr writeoff) of capital expenditures in the year 
incurred. Capital costs per ounce of recoverable gold are 
remarkably similar for most operations, which indicates 



that, to a certain degree, capital costs reflect adjustments 
by the operations to the grade of ore and mining conditions 
that are encountered. Thirty of the operations have capital 
costs per ounce of recovered gold ranging between $30 and 
$60. 

Operating costs per ounce of recoverable gold show a 
wide range over all operations ($123 to $488), but at least 
50 pet of all operations have estimated costs between $150/tr 
oz and $250/tr oz. 

The single most important component of operating cost 
is labor, which accounts for an average of approximately 
48 pet of basic mining costs and 42 pet of basic milling costs. 
Another factor input of importance is the capital cost of min- 
ing and milling equipment and replacement parts. Figure 
13 plots index data on the rate of increase since 1970 in 
both of these two major components of South African gold 
production costs, i.e., basic wage costs (with no allowance 
for productivity changes, fringe benefits, etc.) and mining 
and milling equipment costs (9, pp. F1-F2). Both general 
cost categories have steadily increased since the early 
1970's, with wage costs increasing at a faster rate than 
equipment costs. This is attributable to both rising gold 
revenues and rising expectations of black mine workers. 
Changes in labor relations have recently culminated in the 
legalization of black mine workers' unions. Labor wage costs 
in South Africa have increased at an average rate of 17 pet 
annually since 1978. It was in this year that labor wage 
costs began to rise faster than the cost of mining and mill- 
ing equipment, which has risen at an average annual rate 
of 12.5 pet since 1978. 

Also shown in figure 13 are the U.S. dollar-based 
equivalents of these two index series. Since 1980, the gap 
between the cost of labor and equipment in rands and the 
cost in dollars has widened significantly owing to the 
devaluation of the rand. This devaluation has offset both 
rising rand-based production costs and declining U.S. dollar- 
based gold prices. 

The operating cost data shown in table 17 reflect a con- 
stant 1984 dollar analysis. It is interesting though to look 
at possible future trends in production costs based on the 
assumption of continued wage cost increases at South 
African gold mining operations. Toward that end, an 
analysis was performed that addressed this issue in the 
following manner. First, the trends in the cost of major fac- 
tors of production since 1978 were ascertained. Second, this 
information was used to escalate mine and mill operating 
costs for a 10-yr period, 1985-94. These escalated costs were 
then held constant at their 1994 values for the duration of 
the mines' productive life and were employed in 
reestimating long-run total break-even unit costs of produc- 
tion. Lastly, these determined unit costs under the escala- 
tion scenario were compared to the constant 1984 base case 
costs derived earlier. 

Since 1978, combined rand-based mine and mill 
operating costs have increased at an average annual rate 
of 16 pet. This analysis assumed that this rate will continue 
during 1985-94 and that the rand will continue to devalue 
at an assumed average rate of 8 pct/yr, thus offsetting only 
one-half of the rand-based cost increase. This results in an 
annual 8-pct U.S. dollar-based cost increase for all opera- 
tions during 1985-94. 

The results of this analysis are given in table 18. As 
shown in the escalating cost case, 18 operations (contain- 
ing 53 pet of available gold) have total production cost 
estimates below $500/tr oz, as compared to 36 operations 
(containing 95 pet of available gold) under the base case 



20 



350 



300 



250- 



O 

O 200 






Q 150 



100 



1 1 1 

KEY 

— Labor index, rands 

— babor index, U. S. dol lars 

— Equipment index, rands 

— Equipment index, U.S. dollars 




1970 



1972 



1974 



1976 



1978 



I960 



1982 



1984 



Figure 13. — Rate of Increase In labor and equipment 
costs In rand and dollar terms, 1970-83. 



Table 18. — Total South African gold potentially 

available at increasing cost or price levels: base case 

versus 8-pct-escalation case 



_ Available gold at Number of 

Gold cost or break-even DCFR0R, operations 

price level, 1Q6 tr oz (cumulative) (cumulative) 

p y Base Escalated Base Escalated 

case case case case 

$200 143.2 3 

$300 515.8 54.3 21 3 

$400 600.2 70.5 28 7 

$500 664.1 368.9 36 18 

Over $500 701 .7 701.7 38 38 

scenario. Thus, without devaluation of the currency to off- 
set wage cost increases, the economics of gold production 
in South Africa could be severely affected. This analysis, 
however, actually serves to underscore the long-term com- 
petitiveness of the South African mines for four reasons. 
First, it is not at all implausible to assume that dollar-based 
production costs in other major producing countries will also 
arise at an 8-pct average rate. Second, it is also not implausi- 
ble to assume that the price of gold during the next 10 yr 
will increase at an average rate of 8 pct/yr in 1984 U.S. 
dollar terms. Third, even if labor wage costs more than dou- 
ble, as assumed in this analysis, and U.S. labor wage costs 
remain constant, average South African wage costs would 
still be only about one-third of the U.S. level. Fourth, gold 
is not expected to become a commodity where producers 



compete for a tight or dwindling market plagued by over- 
supply or lack of demand because production costs and mine 
production do not influence market price. The gold price 
is demand driven, and it is fully expected that South African 
production will continue to adjust to market prices and re- 
main the most significant supplier for the rest of this 
century. 

Effect of Exchange Rate Variation Upon 
Industry Profitability 

The profitability of South African mines has been 
significantly affected recently by variations in the value of 
the rand relative to the U.S. dollar. Since September 1983, 
South African mines have been paid directly in U.S. dollars 
for their gold production. This has had the effect of transfer- 
ring foreign exchange gains to the mines, which has helped 
to offset rising rand-based production costs. For example, 
during 1981-83 rand-based production costs increased be- 
tween 28 and 30 pet. But during this same time period the 
rand-dollar exchange rate depreciated some 27 pet. The 
result has been that dollar-based gold production costs in 
South Africa have increased only 1 to 3 pet from 1981 
through 1983. 

This foreign exchange gain has also helped to offset 
declining dollar-based gold prices. Where transactions in- 
volve a dollar-rand exchange rate (the "dollar price of the 
rand") that has declined more than the dollar price of gold, 



the rand price of gold has actually increased. This helps to 
maintain profitability for the majority of South African 
mines. Figure 14 presents data on total gold revenues ex- 
pressed in rands and U.S. dollars. Of particular importance 
is the period 1980-83. 

During 1980, the average annual price of gold reached 
an historic high of $612 tr oz. South African gold produc- 
tion was 21.7 million tr oz., which generated total industry 
revenues of $13.3 billion. At the average annual exchange 
rate, this was the equivalent of 10.3 billion rands CR). From 
1980 to 1983, the average annual dollar price of gold fell 
30 pet, and South African gold production, at 21.8 million 
oz, was essentially the same as in 1980. Thus, dollar -based 
revenues for 1983 also fell 30 pet to $9.3 billion. Revenues 
in rands, however, were unchanged at R10. 3 billion because 
the dollar-rand exchange rate had also declined by an 
equivalent 30 pet. Thus, the devaluation of the rand offset 
the falling dollar price of gold and helped maintain industry 
profitability. South African gold production remained more 
or less constant from 1980 to 1983 because the price of gold 
in rands, and hence total rand revenues, remained more 
or less constant. 

Not all of the foreign exchange gain observed during 
1983 was transferred to the mines themselves, since pay- 
ment in dollars did not become official until later in the 
year. The impetus for such a payment change is evident 
from figure 14, where it can be seen that in 1981 the dollar 
curve dropped below the rand curve due to the rand falling 



21 



below parity (Rl = $1) with the dollar. The gap between 
the dollar curve and the rand curve is the average foreign 
exchange gain accruing due to the rand devaluation. The 
driving force for this devaluation was the declining dollar- 
based gold price itself as well as a positive inflation differen- 
tial between South Africa and the United States. With rand- 
based costs rising 14 to 16 pct/yr and dollar-based revenues 
falling, a change to enhance profitability became an 
economic imperative. 

Preliminary data for the first 6 months of 1984 show 
that this trend has continued. The dollar price of gold had 
fallen to a 6-month average of $381/tr oz, a decline of ap- 
proximately 9 pet relative to the average 1983 price. The 
dollar-rand exchange rate during this same period had 
fallen by approximately 11 pet, thus causing rand-based 
gold prices to rise slightly (R4/tr oz to R5/tr oz). Thus, declin- 
ing dollar revenues were again being offset by rising rand 
revenues, and profitability was being maintained. 

The most recent data available on exchange rates and 
dollar gold prices indicate that the rand devaluation has 
continued at an increasing rate. The dollar price of gold has 
also continued to decline. If and when the price of gold 
begins another strong upward spiral, it is possible that the 
devaluation of the rand will be checked, and an apprecia- 
tion would be in order given a large enough increase in the 
dollar price of gold. By definition, a rising dollar gold price 
means that the value of the dollar is declining relative to 
gold, but not necessarily relative to the rand. 






12 
Mi- 




no 



10 

IOO o 



90 C 

a 

_j 

80 _l 



^0 



970 



^2 



9 74 



1976 



1978 



ORG 



1982 



1984 



Hgura 14.— Total gold ravanuaa In randa and dollars, 
1070-33. 



22 



Annual Production Potential 

How long the gold resources of South Africa last will 
be determined by the differential between long-term pro- 
duction cost and market price, current production rates, ex- 
pansion plans for existing mines, and the development of 
new mines in the future. 

It appears that the South African gold industry, far from 
stagnating or declining, remains very optimistic about the 
future of gold mining in that country. For example, General 
Union Mining Corp. (Gencor) has recently announced the 
development of a new mine (not included in our analysis) 
in the Evander Goldfield of Eastern Transvaal. The Poplar 
Mine is estimated (10, p. 10) to contain approximately 60 
million mt recoverable ore with an average recovery grade 
of 5 g/mt over the mine life. This equates to about 9.6 million 
tr oz recoverable gold. To put the size of the resource base 
at this one property into perspective, the Poplar Mine alone 
is estimated to contain more gold than the demonstrated 
resources of the top 12 producing gold mines in Zimbabwe, 
which is ranked 11th in world production. At an initial pro- 
duction capacity of 175,000 to 275,000 tr oz/yr, Poplar would 
be considered average to small in size relative to existing 
South African mines, yet it would be as large or larger than 
either of the two newest major gold mines in the United 
States — McLaughlin (under development) and Jerritt Can- 
yon (producing). Poplar may begin producing by 1988. 

Another new South African mine development, the 
Beatrix Mine, began producing in December 1983. This 
mine was included in our analysis. It is estimated to have 
approximately 40 million mt recoverable ore with a mill 
feed grade of 6 g/mt. Annual production is currently 
estimated at 350,000 to 375,000 tr oz refined gold. Accord- 
ing to production plans for 1985, this mine alone will pro- 
duce almost as much gold in that year as total projected 
production for the entire gold mining industry in Zimbabwe. 

These two new mine developments are simply exten- 
sions of producing goldfields (Evander and Orange Free 
State) that in at least one case have been known about for 
years. In addition, expansions to capacity or maintenance 
of production by developing new shaft systems at present- 
ly producing mines essentially represent new mine develop- 
ment as well. For example, the consolidation of the East 
and West Driefontein operations will allow the North 
Driefontein area to be exploited as an addition to this 
merged operation rather than as a new mine. The North 



Driefontein area is estimated to contain approximately 27 
million mt ore grading 14.3 g/mt or 12.4 million tr oz con- 
tained gold (11, p. 135). The merger of West and East 
Driefontein may allow the boundary pillars separating them 
to be mined. These pillars alone are estimated to contain 
approximately 900,000 tr oz gold. 

Another example of South Africa's potential for expan- 
sion is Randfontein Estates, one of the oldest mines in the 
country, which began exploitation of the Cooke section (6 
to 8 miles south of the old mine) in 1973 (12). The Cooke 
section, although part of the old Randfontein Estates opera- 
tion, still represents a new mine development. In addition, 
sinking and development of the new No. 3 shaft in the Cooke 
section is expected to be completed by 1985. This new shaft 
will increase output significantly and is also essentially a 
new mine development. 

The preceding examples show that significant develop- 
ment activity continues in the gold mining industry of South 
Africa. They also underscore the difficulty of predicting 
future production and the life of gold-bearing resources 
based upon a static analysis. The typical assumptions that 
are usually employed for predicting future gold production 
in South Africa follow: 

1. Output from each mine will remain at current full- 
capacity levels (which may or may not include expansions 
underway). 

2. No new discoveries will be made. 

3. Some new mines in already proven areas will be 
developed. 

The result of this type of static analysis is invariably the 
prediction of rapidly declining total annual production as 
the demonstrated resources of existing mines are exhausted 
and not replenished. This results in South Africa experi- 
encing a decreasing percentage share of the world new gold 
market and the implication of nearly complete overall 
resource exhaustion. These two very recent new mine ex- 
amples (Beatrix and Poplar), along with numerous expan- 
sions of existing operations, show the potential for error, 
especially underestimation, that exists under this type of 
static scenario. In fact, of the 44 evaluated operations, 6 
underground and 6 surface waste reprocessing operations 
were not in production in 1975. 

With the above discussion as an important caveat, the 
reader is referred to figure 15, which presents estimates of 
potential annual gold production available at three different 
break-even cost-price levels ($300, $400, and $500) for 




oL- 

1984 



X 



■X, 



X 



_L 



••Nn.T.niy 



X 



X 



1989 



1994 



1999 



20O4 2009 



2014 



2019 



2024 



2029 



Figure 15. — Potential annual South African gold 
available at various break-even production cost levels, as 
of January 1984. 



Table 19. — Eattmatsa of potential annual South African production capabMtlee, thousand troy owncaa 



Number o) 
In operation' 



Bureau of 

Mines 
pfQ)eclons 



Gold Institute 
projection s<2) 



23 



Chamber o( Mines 
Projections 
{13. p 333) 



1984 
I9BS 
1966 
1967 
1990 
1995 
2000 

2005 

2010 
2020 
2030 
2040 



43 
43 
43 
40 
39 
36 



30 

24 

16 
6 



21.788 
22.088 
23.39S 
23.818 
22 534 
22.382 
21.303 



19.531 

14.905 

7.773 

511 

484 



22.184 
22.505 
22.505 
NA 
NA 
NA 
NA 



NA 

NA 
NA 
NA 
NA 



NA 

NA 

NA 

NA 

•23.148 

NA 

•21.862 

'20.094 

•18.325 

•18.004 

'15.432 

NA 

NA 

NA 

NA 



No* evoiaMe 'According to Bureau ol Mines 'Static analysis 'Assuming a 10-mt/yr growth rate 'Assuming a 5-mt/yr growth rate 

Table 20. — Mlna operating coat ••ttmatea for underground gold mlnaa on the Wrtwatererand, South Africa 



Low-cosl 

mines 

Number o< operators 10 

Ma teed, p/mt- 

Range 3 5-7 3 

We^hted average' 5.2 

M«ne ope»etmg cost range (per metric ton ore): 

Range $24 42-$34 46 

Weighted average $30 28 

Average mine ope'ating cost (pe» troy $190 65 

ounce ot recoverable goidy 

Labor cost 

Average $17 74 

Percent ot total mine operating cost 49 

'Based on capacities cca '981-82 

'Average mming cost applied to weighted-average mill teed grade and utiliz- 
ing a 9S^pct null recovery lector 

1984-2025. These estimates (not including the Poplar Mine) 
show South African production (assuming full capacity 
utilization) peaking in 1987 and gradually declining 
through the turn of the century with significant declines 
thereafter. Table 19 presents additional supporting data for 
figure 15, including the number of mines estimated to be 
in operation in selected years and future production 
estimates by the Gold Institute (2) and the South African 
Chamber of Mines (13, p. 333). The estimates are very 
similar over the 1984-90 period. After 1990, they differ only 
in assumptions concerning new discoveries. (See footnotes 
of table 19.) In this analysis, it is expected that by the year 
2000 eight currently producing underground mines will 
have ceased production, yet total annual production in 2000 
could still approximate 21.3 million tr oz, essentially the 
same as in 1984, if the expansions announced or initiated 
are realized. Average mine life of the underground mines 
is approximately 30 yr, indicating a high level of produc- 
tion being maintained into the early 21st century. As 
analyzed in this study, individual mine annual output 
shows wide variation, with nine underground mines capable 
of producing more than of 1 .0 million tr oz/yr of refined gold. 
These estimates include several large expansion or con- 
solidation projects spurred by the rapid escalation in gold 
prices. 

The rapid escalation of the gold price has also caused 
increased interest in the reprocessing of surface waste. This 
study evaluated only those operations treating existing low- 
grade sand and slimes dump material grading from 0.3 to 
1.0 gmt gold. The amount of gold estimated to be 
recoverable from all six evaluated reprocessing operations 
as of January 1984 is approximately 14 million tr oz, which 
represents only 2.0 pet of the total amount of recoverable 
gold. In only one of the six cases (Joint Metallurgical 
Scheme in the Orange Free State) did the study evaluate 
the reprocessing of slimes material being produced from cur- 
rent milling operations. This analysis did not address the 



Medium-cost 
mines 



High cost 
mines 



Total, range, or 
weighted average 



10 



3.5-10 
7.5 


4 6-16 1 
9.4 


35-18 1 
7.4 


$35. 19- $44 71 
$40 40 


$4682-$5677 
$4903 


$24 42-$56 77 
$40 00 


$176 24 


$170.77 


$176.99 


$18 87 
47 


$24 32 

so 


$1925 
46 



reprocessing of tailings that will be produced by the treat- 
ment of the 3.0 billion mt of recoverable underground ore 
estimated to be present as of 1984; consequently there could 
still remain approximately 10 million tr oz of additional gold 
to be recovered from this source. 

South African mines are required by law to mine to the 
average value of their reserves. This means that as prices 
rise, lower grade material is mined and refined gold out- 
put either declines or remains more or less constant. Ris- 
ing prices thus serve to lengthen the life of the mines cur- 
rently producing and increase the incentive to further ex- 
plore, expand, and develop the industry. The South African 
gold industry is not expected to decline to a point of relative 
insignificance for at least 30 yr, even assuming no expan- 
sion of the resource base; however, it is certain that the next 
100 yr or so will see a very significant decline of this in- 
dustry, barring major new discoveries within South Africa. 

Other estimates of the long-term gold production poten- 
tial of South Africa differ from those made in this report. 
One source predicts that by 1992 the Soviet Union will sur- 
pass South Africa in yearly production, and that by 2000 
yearly South African output will total only 11.5 million tr 
oz, a decline of almost 50 pet (14). The data of this paper 
(and those of the South African Chamber of Mines) argue 
that there is a very low probability of such a large and rapid 
decline, assuming that market forces are the only factors 
involved. As shown in table 20, the evaluation presented 
in this study does not show a rapid decline occurring until 
the first decade of the next century. Furthermore, even with 
an assumed 50-pct reduction in yearly output to 11.5 million 
tr oz, South Africa would still rank at least second in world 
production, unless production in either Canada, China, 
Brazil, or the United States increased to 5 to 8 times the 
current level. The probability of such increases being 
achieved and sustained is low. 

The period beyond the year 2010, which in figure 15 
shows significant declines in annual gold production, 



24 



Tabt* 21.— Technical and operational data, within rankings as to mining coat levels, South African underground gold mines 1 



Low-cost Medium-cost High-cost 

mines mines mines 

Number of operations' 10 15 10 

Average age of operations yr . . 28 33 34 

Maximum working depths 1982-1984, m: 

Range 850-1.900 1,300-2.900 1,000-3.700 

Average 1.355 2,237 2,415 

Estimated final maximum working depth, m: 

Range 1.000-2.300 2,200-4.000 1.000-4.200 

Average 1.590 2,789 2,878 

Number of mines requiring refrigeration as of 1981 4 14 9 

1981 mining productivities, tons per worker-year: 

Range 225-360 168-360 135-183 

Average 297 237 162 

1981 stoping widths, m: 

Range 0.90-1 64 0.90-2 06 0.98-1.65 

Average 1.39 1.48 1.29 

Annual operation capacity, 10 5 mt/yr: 

Range 240-7.700 1,100-7.600 270-3.400 

Average 2,030 3.630 2,100 

Number of production shaft systems: 

Total 22 54 33 

Average per operation 2.2 3 6 3.3 

Average ore capacity of shaft systems 10 s mt/yr . 920 1 .000 640 

Total ore capacity, 1981-82 10 5 mt/yr 20.300 55.000 21,000 

'Cost rankings based on mine operating cost in 1984 dollars per metric ton. 
Low-cost, $25.00-$35.00; medium-cost, $35.01 -$45.00; high-cost, $45 01 and above. 

'Total of 35 rather than 38. East Dreifontein and West Oreifontein mines were treated as separate mines in the technical and operational data analyses: 2 operations were not Included because 
of small remaining resources. 

reflects the basic fact that any static analysis that assumes A similar example can be presented using the Golden 

that no new discoveries will be made will always show Giant Mine in the Hemlo District of Ontario, Canada. This 

resource exhaustion. It is not feasible here to address the district is the largest gold mining development in Canada 

question of the potential for future gold discoveries in South in several decades and is one of the most significant ongo- 

Africa beyond the areas and reefs analyzed in this study. ing developments today in the world gold industry. The 

It is feasible, however, to address the question of whether Golden Giant Mine is scheduled to reach full-capacity pro- 

or not the other MEC's could increase their production duction in 1987 at 291,000 tr oz/yr. But compensating for 

enough to compensate for the decline in output resulting the 7.6-million-tr-oz decline outlined above would require 

from the depletion of the current demonstrated resources the development of at least 26 new mines on the scale of 

of these 44 evaluated operations. the Golden Giant during the next 25 yr, while still main- 

_ . . taining current high levels of annual output in the other 

Ability of Other Market Economy Countries major pro ducing nations. 

to Compensate for the Expected Decline The obvious implication is that other MEC's probably 

In South African Production cannot replace gold production on a scale as large as that 

The United States is currently ranked fourth in world of South Africa, which implies declining world annual pro- 
production. In 1983, the United States produced 1.957 duction. In terms of geologic probability, the chance of 
million tr oz gold, an increase of 42 pet over 1981 output, discovering another Witwatersrand-type basin, which is the 
significantly reversing a decade-long decline. The increase largest gold producing area in South Africa, is considered 
came in response to tremendous exploration and develop- to be very low. 

ment activity underway since 1974, when the gold price It is expected that the significant increases in annual 
began to increase rapidly. Canada is currently ranked third gold production experienced since 1980 in the United States, 
in world production. In 1983, it produced 2.274 million tr Canada, Australia, and Brazil (which are all major MEC 
oz gold, an increase of over 36 pet relative to 1981. By com- producers) will continue throughout the 1980's in response 
parison, South African production from 1983 is estimated to rising gold prices and continuing exploration and develop- 
to have increased by only 3.6 pet over that of 1981, yet this ment activity. This will compensate for some, but clearly 
small percentage increase represents 762,000 tr oz of addi- not all, of the decline in South African production, even ac- 
tional gold production. This points to the fact that relatively cepting the relatively moderate declines outlined in this 
small percentage changes in South African output are quan- paper, 
titatively as important as even very large percentage 
changes in the outputs of other major producing countries. GOLD MINING IN SOUTH AFRICA 

An example of a world-class primary gold mine that was 
recently brought into production is the El Indio Mine in Many of the issues concerning the gold industry of South 

Chile. El Indio has the potential to produce about 2.7 million Africa are best examined from a mining engineering 

tr oz from the current demonstrated resource estimate. In- perspective. The following sections discuss in detail the ma- 

itial annual production is estimated at 167,000 tr oz. This Jor factors involved with the mining and processing of gold 

size is similar to other world-class mines, such as ore in South African mines. Discussion of gold mining in 

McLaughlin or Jerritt Canyon in the United States, that South Africa falls into two major categories: underground 

are currently under development or in an early stage of pro- mining of primary ore, and surface reclamation of low-grade 

duction. To compensate for a projected annual decline in waste dumps and sand-slime tailings from prior milling. 

South African production of 1.3 million tr oz/yr between Each will be discussed separately. 
1987 and 1990 would require the development of at least . 

seven mines on the scale of El Indio. To replace a projected Underground Mining 

reduction in annual output of 7.6 million tr oz/yr between 

1990 and 2010 (assuming no new South African discoveries) As already noted, 38 of the 44 operations analyzed in 

would require the development of at least 45 mines on the this study are mining primary gold ores with underground 

scale of El Indio. mining methods. All but 1 of the 38 produce a majority of 



25 



mill feed from underground mining, and all but 2 of the 38 
were producing throughout 1983. The 36 operations that 
produced during all of 1983 accounted for 90 to 100 million 
mt ore feed during that year. The other two operations 
began production in late 1983 or early 19S4. When in full 
production, these new producers will add about 2.6 million 
mt annual ore feed from underground sources. 

Of the 38 underground mines. 36 produce from Wit- 
watersrand Basin paleoplacer gold deposits, and 2 produce 
from lode gold deposits in the Archean "greenstone" gold 
district of the Eastern Transvaal. 

It is not feasible to address all of the various facets of 
the underground mining practices at the 38 evaluated 
operations. However, five aspects make the Witwatersrand 
Basin gold mining operations unique in comparison with 
other gold mining operations around the world. These 
unique aspects, which are important to an understanding 
of the availability of gold from Witwatersrand Basin 
deposits, follow: 

1. Large-tonnage, multishaft operations. 

2. Highly labor intensive, yet highly mechanized 
operations. 

3. Mining to great vertical depths. 

4. Very high capital cost requirements. 

5. Technological research and constraints. 
Witwatersrand Basin gold mining operations are located 

in an area of flat topography. The size of mining lease 
holdings ranges from 450 hectares thai to 15,750 ha, and 
average 5,500 ha. In total, the 36 Witwatersrand Basin 
properties comprise approximately 200,000 ha of mining 
leases. Large mining lease areas are necessary because of 
the thinness of the ore bodies being mined. Stoping widths 
'ore body thicknesses i range from 0.9 to 2.3 m with an 
average of slightly over 1.4 m. Thus, with the 36 mines proc- 
essing a combined 95 million mt ore annually, the gold min- 
ing operations need a large area for the disposal of the tail- 
ings and the development of new ore zones. Only with 
favorable topographic conditions, such as occur in the Wit- 
watersrand Basin, could such a large level of sustained pro- 
duction be accommodated. 

As analyzed in this study, the 36 Witwatersrand Basin 
underground mining operations have hoisting capacities 
ranging from 750 to 27,000 mt d ore and up to 14,500 mt/d 
waste '225,000 to 8.1 million mt'yr ore hoisted and up to 
4.3 million mtyr waste hoisted}. The typical mining opera- 
tion on the Witwatersrand will average about 8,300 mt/d 
ore and 2,200 mtd waste '2.5 million mt/yr ore and 660,000 
mtVyr waste). Of the 36 operations 29 are producing from 
more than 1 shaft system, 7 ranging from 2 to as many as 
9 separate shaft systems at a single operation. 

To extract 95 million mt ore and 25 to 30 million mt 
waste per year at these 36 operations requires approxi- 
mately 480,000 employees for all activities including min- 
ing, milling, surface facilities, and administration. This 
represents productivities of only about 200 mt ore milled 
per worker-year, or about 0.66 mt ore per worker-shift. 
Detailed breakdowns of the proportion of workers employed 
in underground activities and those involved in surface ac- 
tivities are not published for all of the operations involved. 
Where published, it appears that about 25 to 30 pet of total 

'As used in this study of the South African gold mining industry, a "shaft 
system" is comprised of all appropriate shafts 'ventilation and productioni 
necessary to service a specific area of the operation's overall lease area. The 
number of shaft systems eventually needed to mine out an entire lease area 
and the number of shaft systems required at any specific point in time over 
the life of the operation will depend on the overall size of the lease area, 
the company's requirements for ore and waste hoisting capacity, mill loca- 
tions, and underground haulage distance limitations. 



employees work at surface activities, including transpor- 
tation, milling, and plant activities, while 70 to 75 pet work 
underground. Underground mining of Witwatersrand gold 
ores is labor intensive for two major reasons. First, the work- 
ing areas are low-backed, ranging from around 1 to 3 m in 
height, and extend over large horizontal and vertical 
distances. Thus, a typical mine will require that 10,000 m 
of mining face be available for stoping at any one time. Se- 
cond, there are at least two or three transfers of ore from 
the point of extraction in the stope to delivery to the rail 
cars in the main haulage levels. For a more detailed descrip- 
tion of the mining methods at Witwatersrand gold mines, 
the reader is referred to reference 15. 

Two major constraining factors are constantly being ad- 
dressed in terms of technologic research by the South 
African Chamber of Mines: (1) labor productivity and (2) 
heat, humidity, rock pressure, high rock-stress patterns, 
seismic events, rock bursts, and ventilation and refrigera- 
tion problems caused by the great depths of mining and the 
lateral extent of the workings. A discussion of all of these 
problems and how they are being addressed is beyond the 
scope of this paper. Rather, this section focuses on how this 
study addressed these constraining factors from a resource 
and cost point of view. 

Tables 20 and 21 present estimated costs and technical 
and operational data for 35 (see footnote 2 of table 21) of 
the major underground operations producing in the Wit- 
watersrand Basin in the early 1980's. The operations are 
categorized into three levels of mining cost on a per ton of 
ore milled basis: (1) low cost, or $25 to $35, (2) medium cost, 
or $35.01 to $45, and (3) high cost, greater than $45. Ten 
of the 35 operations fall into the low-cost range with an 
average cost of $30.28/mt ore. Fifteen are in the medium- 
cost range with an average cost of $40.40/mt ore. Ten opera- 
tions fall into the high-cost range with an average cost of 
$49.03/mt ore. During 1981-82, the 10 low-cost operations 
accounted for about 20.3 million mt underground ore feed. 
The 15 medium-cost mines fed about 55 million mt 
underground ore to their mills, and the high-cost mines sent 
about 21 million mt ore to their mills. Thus, about 79 pet 
of total ore capacity in the early 1980's was in the medium- 
to high-cost range. The weighted-average mining cost for 
all mines is estimated to be $40/mt ore. 

Labor costs constitute the largest percentage of total 
mine operating cost. As estimated in this study, labor costs 
account for 49 pet of total mine operating cost for mines in 
the low-cost range, 47 pet for mines in the medium-cost 
range, and 50 pet for mines in the high-cost range. This 
aspect is very important since approximately 90 pet of the 
labor force are black workers who were being paid the 
equivalent of between $3,000 and $3,500 per year, circa 
1981. On a weighted basis (white plus black employees com- 
bined), each mine employee was being paid between $4,500 
and $5,000 per year in 1981, which is about 15 to 20 pet 
of the pay scale of employees in the U.S. gold mining in- 
dustry. If U.S. mining industry pay levels existed at the 
gold mines in South Africa, the weighted average mining 
cost of $40/mt would increase by $109 to around $150/mt. 
This would render all evaluated South African gold 
resources uneconomic, given 1982-84 price levels. 

The operational data for the three cost categories shown 
in table 20 were compiled to determine the major factors 
involved in the increasing cost levels experienced in Wit- 
watersrand underground mines. Before compiling the data, 
it was felt that five basic operational factors would affect 
the mining cost level by affecting productivity. These five 
factors were— 



26 



1. The number and capacity of the various shaft 
systems at the operations. 

2. The age of the operation. 

3. The depth of mining. 

4. The stoping widths. 

5. The percentage of waste sorted prior to milling. 
As expected, the major difference found among the three 

cost levels is the measure of 1981 mining productivities per 
ton of ore milled per worker-year. As shown in table 21, the 
low-cost mines had average productivities of 297 mt/yr, the 
medium-cost mines had average productivities of 237 mt/yr, 
and the high-cost mines had average productivities of 162 
mt/yr. Thus, average mining labor productivity is 20.2 pet 
lower at the medium-cost mines and 45.5 pet lower at the 
high-cost mines. Further analysis of the data indicates that 
these lower mining productivities are primarily due to the 
increasing depths of mining. As shown in table 21, the 
average maximum working depth at the low-cost mines in 
1982-84 was estimated to be 1,355 m. By comparison, the 
average maximum working depth at the high-cost mines 
in 1982-84 was 2,415 m, or 1,060 m deeper in vertical depth. 
This link between increasing depth and declining overall 
mining productivity is also shown in table 22, which com- 
pares actual operating data for one South African mine in 
1960 (about 7 yr after startup) and in 1981 (28 yr after star- 
tup). During this 22-yr period, the depth of mining increased 
1,000 m, and despite 22 yr of technological improvements, 
productivity decreased 10.7 pet in terms of tons of ore plus 
waste hoisted and 8.5 pet in terms of tons of ore alone. 

The increasing depth of mining also increases the 
nonlabor costs associated with hoisting and haulage, the 
need for refrigeration and/or the refrigeration costs, and 
ventilation and compressed air needs. Depending upon the 
area of the Witwatersrand Basin being mined, refrigera- 
tion is usually required at a vertical depth of 1,100 to 1,300 
m. As shown in table 21, only 4 of the 10 low-cost mines 
required refrigeration as of 1981, while 23 of the 25 medium- 
and high-cost mines required refrigeration. The nonlabor 
costs for refrigeration were estimated to range from about 
$1.20/mt to $1.50/mt ore to $3/mt ore at those mines with 
the largest refrigeration requirements. 

In this study, 75 to 80 pet of the $10.12 increase in 
average mining cost from the low- to the medium-cost levels 
can be attributed to increasing depth, which in turn results 
in decreasing labor productivity, increasing hoisting and 
haulage distances, and increasing refrigeration, ventilation, 
and compressed air needs. In turn, the increase from the 
medium-cost to the high-cost level of $8.63/mt ore is heavily 
influenced by the drop in labor productivity, with the in- 
crease in the cost of labor representing about 63 pet of the 
increased cost. It is possible that the decrease in ore capacity 
at the average-sized shaft system (from 1 million to 640,000 
mt/yr) from the medium-cost to the high-cost levels 
magnifies the drop in labor productivity and the consequent 
increase in mining labor costs. 

There is a final factor involved in comparisons of the 
various cost levels of Witwatersrand underground gold 
mines. This factor is the grade of ore being milled at the 
various cost levels. Table 20 contains the range and 
weighted average gold grades of the operations comprising 
the three cost levels based on 1981-82 ore capacities. Also 
shown, for comparison, are average mine operating costs 
for the three cost levels, in terms of dollars per metric ton 
of ore milled and of dollars per ounce of recoverable gold. 
When the cost is compared in terms of dollars per ounce 
of recoverable gold, the orders of the three cost levels are 
reversed, with the low-cost mines becoming the high cost 



Table 22. — Comparison of mining productivity 

changes, 1960 and 1981, based on actual results at a 

South African mine 



1960 1981 Change 

Average level worked 1 25 NAp 

Vertical depth of average 

level worked m . . 1 ,500 2,500 + 1 ,000 

Total employees (actual) 6,848 9,246 +2,398 

Employees in mining-related 

activities (estimate) 6,163 8,396 +2,233 

Ore and waste hoisted 10 3 mt. . 2,057 2,497 +440 

Indicated mining productivity: 

Ore plus waste per worker-year mt. . 333.8 297.4 -36.4 

Ore milled 10 3 mt. . 1,160 1,440 +280 

Indicated underground productivity: 

Ore milled per worker-year mt. . 188 172 -16 

NAp Not applicable. 

mines and vice versa. This exercise simply verifies the fact 
that most of the Witwatersrand producing gold mines ad- 
just their operations to the grade of ore available and the 
mining conditions encountered. Some operations have high 
mining costs (on a per ton of ore basis) along with low 
grades, which puts them in a marginally economic position, 
but most of the operations have mining costs that are 
economic given their ore grades. 

A key element in any discussion of South African 
underground gold mines is the question of the depth of min- 
ing, especially as it relates to cost and resource estimations. 
As of 1981, the deepest areas being stoped were between 
3,600 and 3,700 m (about 2.3 miles) below the surface. The 
average maximum depth of mining in 1981 at the 38 ma- 
jor underground mines analyzed in South Africa was about 
2,035 m, with only 2 operations working at maximum 
depths of over 3,000 m. It is estimated that to extract the 
2.988 billion mt demonstrated underground resource 
estimated in this study, the 38 operations would have to 
mine to an average maximum mining depth of about 2,450 
m. As analyzed, five of the operations will eventually be 
required to mine to maximum vertical depths of 3,500 to 
4,100 m, and five will have to mine to maximum vertical 
depths of 3,100 to 3,500 m. 

As of the early 1980's, it appears that at depths between 
3,500 and 4,100 m, major technological problems develop 
in underground mining in the Witwatersrand Basin. These 
technological problems and a brief summary of some of the 
research activities involved in addressing the problem have 
been discussed in reference 15. Because of the problems 
beginning at the 3,500-m level, it is important to under- 
stand the extent to which the analyzed demonstrated 
resource is composed of material at depths greater than 
3,500 m. Thus, at the five operations that are proposed to 
mine to maximum depths of greater than 3,500 m, about 
0.16 billion mt (5.4 pet) of the 2.988-billion-mt demonstrated 
resource is located below the 3,500-m-depth level. This ton- 
nage of ore would contain approximately 43 million tr oz 
(6.1 pet) of the 702 million tr oz of total recoverable gold 
in the underground demonstrated resource that was 
evaluated. This study assumes that this 43 million tr oz will 
actually turn out to be recoverable, but such an assump- 
tion is open to question and much will depend upon future 
developments. In this regard, it should be remembered that 
the majority of those operations facing maximum mining 
depths between 3,500 and 4,100 m will not reach these 
depths until the middle to late 1990's. 

Overall, only seven operations are expected to have the 
average mining depth increase by more than 1,000 m 
beyond the 1981-82 levels. At another eight operations, the 
expected increase in average depth of mining would be 500 



Table 23. — South African milling method* and capacities 



27 




Number ol Mill or extension Tolsl capacity 

MiB category and methods mills o- mill capacities. 10> mt by milling method. 

e«tens.ons R af , g8 — Average 10 ' m,/ V 

Qo*d production only 

Underground material 

Crush-grmd-cyan.de vat leach Mernii-Croweiinc dust 

precio.tal.on 24 270 2.750 1.830 '43 900 

Crush-grind cyan<Je vat leach, carbon-m pulp 6 240- 2.000 1.280 '7.600 

Cmsh-grmd gravity separation, float roast 

concentrates, cyanide-ieach calcines 4 65 165 115 '460 

Surface material Sand and slimes retreatment 3 600 1.300 900 '2.700 

Gold and pyrrte concentrate production 

Crush-grind cyan id* vat leach. Merrill-Crowe jinc dust 

pr-eoprtalion. Itoal taits hx pynte concentrate 2 1.320 2.250 1.800 '3.600 
Gold and uranium production 

Crush-gnnd-val leach tor gotd 19 630- 3.180 2.200 '41.800 

Crush-grmd-vat leach tor uranium 19 630 3 250 2.400 '45,600 

CM sand and sttmea and current atimes treatment 3 6.600 - 23 .400 16.400 '49.200 

Total 80 65 23.400 NM NM 

NM Not meaningful 

'Total milling capacity tor underground gold ore - 97 36 million ml/yr ore milled 

Total mating capacity tor gold In o*d and current sands and slimes = 519 million r.-Myr milled 

Total m*ng capacity tor 0,0, production from underground ore - 45 6 million mt/yr i-illed 

to 1,000 m. For this study, all 15 operations were assumed 1. Crushing, grinding, agitation leaching with cyanide, 

to incur actual real decreases in labor productivity of 10 Merrill-Crowe deaeration, zinc dust precipitation, smelting 

pet over the life of the operations. In addition, at all of the to dore bullion. 

evaluated operations, rough estimates of increased haulage 2. Crushing, grinding, agitation leaching with cyanide, 

and hoisting distances and increased refrigeration, com- carbon-in-pulp extraction of gold, stripping of carbon, 

pressed air, and ventilation requirements were included in electrowinning of gold, smelting to dore bullion. 

the cost estimates. 3. Crushing, grinding, agitation leaching with cyanide, 

float tails from cyanide leach for pyrite concentrate produc- 

Surface Mining tion, deaeration-precipitation-smelting to dore bullion. 

4. Crushing, grinding, gravity separation, flotation, 

o _r , ., A £_. ,, • , roast concentrate, cyanide leaching of calcine from roasting, 

Surface mining of South African gold ores involves on- , . ./ .. ... ■*. , . ... " 

, ., , e • i c_ j j j deaeration-precipitation-smelting to dore bullion. 

ly the reclamation of material from waste and sand dumps _ ~ {_. v . ,. „ , ,. ., , , r ,, 

, ,. , om_ i- j 4.U _*• i r j 5. Crushing, grinding, flotation, cyanide leach for gold, 

and shmes dams. The material is used either as partial feed ,„ ,~ , TT ~ , ,, Tir . ', * - .- .° ., 

.... ... , , .f MnO, and H,S0 4 leach for U 3 0„, production of sulfuric acid 

to primarv milling with underground ore as the primary . v. , L . . " r 

f j c i c i *. from flotation concentrate. 

feed source, or as the primary feed for reprocessing plants. /? m_ c j j v j ■ i 

„,, , *i r _ * • i 6. Treatment of sand and shmes dump material. 

Where a dump consists predominantly of coarse material » , , ,, 00 ., .. , j 

. , r , , v., ,. r As shown in table 23, the 44 evaluated operations con- 
such as sand and rock, the equipment combinations for . . on . ,. ., , .„ A11 -., , . 
i ljuirj uii. tain 80 individual mills. All of the operations involve vat 
reclamation include shovels feeding conveyor belts or, more , .. c ,, ,, T t/-w rinoA i_ i u- 

, , i i j .i i .in. t i_ leaching of gold and/or UjO.; as of 1984 no heap leaching 

commonlv, front-end loaders with trucks. Where the 6 .. 6 , . -., 3 "' . r 

. ..' •.it- l was practiced at any of the major gold operations. For con- 

reclamation material is predominantly shmes material, ., . u . J . ° e n. At_: u r* 

... . . . , ... J , ,. vemence, the milling operations in South Africa can be split 

either bucket wheel excavators with conveyor belts or ., ° r , . , , 00 nm 

r j. ,. , into three major groups as shown in table 23. The group- 

water-jet monitors feeding a slurry to pipelines are used. j j- tv j*- 

rr~ ,. -v ^ ., e . i ■ 1 r . . .. ings were made according to the various commodities pro- 

The distances that the material is transported to the T° , - ., ° 

■ u ■„ e_ aci <?l_*_*l l i- duced as follows: 

mill site range from O.o to 7 km for the non-slurry-pipehne . ™. , , .. . ... 

%~ . , • i- « 1- Those producing only gold bullion. 

operations. The operations using slurry pipelines for or™, j uu n- j * * 

7"" . ,. . , . if _iv fo 2. Those producing gold bullion and pyrite concentrate, 

transporting slimes material require pipeline lengths of 2 ott. j uuir j itt m <■ *u e 

. TTT_ i» .-l. • i l i j • i 3. Those producing gold bullion and U 3 0„ (in the form 

to 14 km. Because the material being reclaimed is very low c v. n ■ j \ i n, t * 

r ,, 6 , J of uranium hexafluonde) along with pyrite concentrates 

in terms of gold grade, the mine operating costs at opera- ,, lf ., ... c /? c , . 

?.. "tTIi .. • r , and/or sulfuric acid either for their own use or for sale to 

tions using this material as the primary feed are very sen- .. 

, ., b , .. c ■ j to. j other operations, 

sitive to the length of conveyance required. The estimated ^ £ Qym fa the footnote8 to table 23 the ana , d min . 

mine operating costs used in this study for shovel and/or treatment of underground ore totals 97.36 

conveyor operations range from $l/mt to $2. 25/mt ore, while - u . r ., ,., ., .... .. . ., .. 

, . J , , , , 6 , ,. . .. million mt/yr, while the milling capacity at those operations 

front-end loader and truck operations were estimated to ., , . . . \z ... . ,, •„ 

a ■ iL .nVni , *o en/ to. that reprocess dump material for producing gold, uranium, 

have operating costs in the $2. 50/mt to $3. 50/mt range. The * j ir • -j * * i ci o ~-ii- JL.*/.^. r„„j 

T^ 6 r . - T™. _. i _ , , pyrite, and sulfuric acid totals 51.9 million mt/yr feed 

operating costs for the bucket wheel excavation and con- " ' , 

veyor belt operations were estimated to be about $2/mt ia ^^ &Q miU J9 were confltructed to ^^ ^.^^ 

^"fii T T P ^ i n r?/ ^ r «n«n/° 8 t i**™ «"d 61 were constructed to produce gold. Of the 61 gold 

estimated to range from $0.1 0/mt to $0.60/mt shmes g ^^ the carDO n-in-pulp method of extract- 

reclaimed. In contrast to the underground mining costs, w from the de ]each 8o]ution The Qther g5 uge 

labor constitutes ^a minor ^portion of these operating costs, the oW Merri „. Crowe deaeration<larification method along 
or about 20 to 30 pet of the total. with zinc du8t precipitation of the gold Not 8urp risingly, 

all of the carbon-in-pulp mills have been constructed since 

r*r»i r> un i mr iu caiitu a coir a 1979. As of 1984, nearly all of the planned new mills in 

UULO MILLINU IN SUU I M ACKH.A ^^ Afrjca ^ probab , y ^^ carbon methoda for gold ex . 

traction. The vast preponderance of Merrill -Crowe plants 
Milling treatment practices at the 44 operations in c^,^ Afnca a8 of 1984 i9 due ^ the fact that the va8t 

analyzed in this study can be generally categorized into 6 majority of mills were constructed prior to 1980 and to the 

basic methods: historical availability of a low-coat labor force. 



28 



The four mills that use gravity separation along with 
flotation and subsequent roasting of the flotation concen- 
trate and cyanide leaching of the calcine from roasting are 
all part of the two evaluated operations in the Eastern 
Transvaal. Gold ores in the Eastern Transvaal are of a very 
refractory nature and contain a fair amount of free gold, 
the opposite of a typical Witwatersrand Basin gold ore. At 
these mills in the Eastern Transvaal, typically 30 to 45 pet 
of the gold recovered comes from gravity separation (free 
gold). Of the remainder, 10 to 20 pet is usually contained 
in the middlings from gravity separation, and 40 to 55 pet 
is in the flotation concentrate, both of which are then 
roasted and leached. Estimated milling costs for these opera- 
tions ranged from $7.01/mt to $14.34/mt ore milled, with 
labor estimated to account for about 25 pet of the total mill- 
ing costs. These costs also include fairly lengthy truck 
haulages for middlings and flotation concentrate products 
to the smelter. This category of milling represents only 0.5 
pet of the total South African underground ore milling 
capacity analyzed. 

The six mills treating underground ore with carbon-in- 
pulp gold extraction methods represent an approximate 
total milling capacity, as of 1984, of 7.6 million mt/yr, or 
only about 8 pet of total underground ore milling capacity. 
Estimated mill operating costs for the capacity ranges of 
240,000 to 2 million mt/yr have a narrow range of $4.98/mt 
to $7.53/mt ore milled with an average of $6.11/mt. Labor 
costs account for about 42 pet of the total estimated mill- 
ing cost; however, labor cost estimates range from 24 to 53 
pet. 

The 24 mills treating underground ore only for gold 
bullion production, using the Merrill-Crowe-zinc dust 
precipitation method for extracting gold from the cyanide 
solution, account for about 45 pet of total underground ore 
milling capacity. These 24 mills are, on average, about 43 
pet larger in ore milling capacity than the 6 mills using 
carbon-in-pulp methods (1.83 million mt/yr versus 1.28 
million mt/yr). Estimated operating costs for 22 of the 24 
mills are not significantly different from the estimates for 
the CIP operations, with an average of $5.94/mt ore milled 
and a range of $3.21 to $7.53. Labor cost estimates for these 
22 mills range from about 30 to 52 pet of the total mill cost 
with an average of 42 pet. The two mills with relatively high 
costs (outside of what appears to be a normal range) include 
one that is very small in capacity and one that is very old. 

Two mills float the tailings from the cyanide leach stage 
to produce pyrite concentrates for sale to nearby operations 
with acid plants that produce H 2 S0 4 to be used in leaching 
for U 3 O g production. These two mills account for only 4 pet 
of the total underground ore milling capacity and average 
about 1.8 million mt/yr. The estimated mill operating costs 
average $6.10/mt ore milled, slightly higher than those 
operations that only produce gold bullion, with labor costs 
accounting for about 43 pet of the total milling cost. 
However, the small number of mills in this category and 
the expected range of error in the estimation method 
preclude making any definitive statements about the added 
costs incurred due to the flotation of tailings for pyrite con- 
centrate production except that they are probably $0.20/mt 
to $0.50/mt ore milled. 

The 11 operations producing both gold and uranium 
from underground ores present a special case for several 
reasons. First, if the installed circuitry used for treating 
the ore for gold recovery is counted as an individual "mill" 
that is separate and distinct from the circuitry treating ore 
for U 3 8 recovery, then these 1 1 operations had a total of 



38 separate mills in place as of 1983. Mills that are used 
only for gold leaching can be, and have been, converted from 
treating underground ore for gold production to treating 
underground ore or old tailings dams material for U s 8 pro- 
duction. However, the economics of the two commodities, 
Au and U 3 8 , are basically different, and the operations are 
set up to reflect those differences. Second, the estimated 
operating costs given in this study for the gold-uranium pro- 
ducers reflect all costs for cyanide leaching for gold bullion 
production and Mn0 2 -H 2 S0 4 leaching for uranium produc- 
tion, any costs for flotation to produce pyrite concentrates, 
and costs of roasting of pyrite concentrates to produce 
H 2 S0 4 , if applicable. Third, some of these operations have 
their own pyrite flotation plants and acid plants, some have 
one or the other, and a few have neither a pyrite flotation 
plant nor an acid plant. For these reasons, a strict com- 
parison of the estimated operating costs at the gold-uranium 
operations with those at operations producing only gold are 
not valid. 

When uranium production from Witwatersrand Basin 
gold ores began in the early 1950's, the typical flowsheet 
involved cyanide leaching for gold bullion production and 
then vat leaching of the tailings from the cyanide leach with 
Mn0 2 and H 2 S0 4 for production of uranium hexafluoride. 
Because of the need for H 2 S0 4 in the uranium vat leach, 
two problems immediately arose. First, the residues from 
the cyanide leach were highly alkaline and required a large 
amount of H 2 S0 4 to lower the pH to an adequate level for 
pyrite flotation. Second, some of the ores that were high 
in U s 8 content were low in pyrite-sulfide content. Thus, 
over the years, three major developments have occurred at 
the gold-uranium operations in South Africa. 

First, some operations have taken to floating the ore 
for pyrite concentrate production prior to the cyanide 
leaching for gold stage. In this case, the calcine residue from 
H 2 S0 4 production is returned for cyanide leaching later. 
Second, some operations have chosen to use what is called 
the "reverse leaching" method, which simply means that 
the uranium leaching stage precedes the gold leaching 
stage. Third, some of the operations do not have a pyrite 
flotation plant or an acid plant because the pyrite content 
of their ore is not high enough. The shortfall in H 2 S0 4 pro- 
duction is covered by those operations that do have high 
pyrite contents in their ores and produce more H 2 S0 4 than 
their own internal needs require. 

The 11 operations producing gold and uranium are 
located in 4 of the 7 gold mining districts on the Witwaters- 
rand. Four are located in the Klerksdorp Goldfield, three 
are located in the Far West Rand Goldfield, and two each 
are located in the West Rand and Orange Free State 
Goldfields. Seven of the 11 operations have flotation plants, 
and 6 of the 11 have acid production facilities. As noted in 
table 24, these 11 operations have a combined total of 38 
individual gold or uranium producing mills. Most of the 
operations treat the same underground ore twice for gold 
and uranium. Two of the operations have a fairly sizable 
capacity for treating old slimes dam material for gold and 
uranium production, and one operation has a large plant 
to produce only uranium from reclaimed slimes dam 
material. Only 2 of the 11 operations were using the reverse 
leach method at some or all of their mills in 1983. 

The 19 gold mills at these 11 operations have a total 
capacity to mill 41.8 million mt underground ore, or about 
43.5 pet of the total underground ore milling capacity that 
was analyzed. Individual mill capacities range from 630,000 
to 3.1 million mt/yr with an average of about 2.2 million. 



29 



Table 24. — Summary of sand and slimes material 
available for reprocessing in South Africa 



Ore. RecoveraDie Recoverable gold. 
10 s mt grade, g/mt I0 6 troz 



1.247 



"o:a -"e'-'C-" ce ~ ec 

1885-1983 4 060 9.55 

Demc-s:-i:e; esource of low- 
graoe material evaluated 
Sands and slimes at 5 major 

reprocessing operations 
Sands and slimes at 10 

underground operations 
Current tailings fCH 
reprocessing as of 1984 
Total or average 
Demonsyatec -esource- 
(not evaluated): 
Remaining sand and slimes 2 
Potential future sand 
and shmes ; 
Total or ave r age 4,964 



1.164 


.29 


10.853 


289 


18 


1.672 


624 


08 


1.605 


2.077 


21 


14.06 


2.600 


23 


196 


2.364 


10 


7.6 



272 



Est iiates of remaining sand and slimes plus remaining current slimes. 

J Total milled 1885-1983 minus demonstrated resource of sands and slimes 

analyzed at 6 major reprocessing operations (1.164 x 10 6 mt) and 10 

;-ound operations (289 x 10* mt). Assumed 95-pct recovery of gold in 

initial milling. 50-pct recovery in reprocessing. 

3 ln situ underground ce-ronstratea resource as of 1 984 minus tonnage be- 
ing reprocessed as o' 1983 Assumed r ecovery of 95 5 pet of gold in initial 
milling. 30 pet m rep'ocessmg 



The 19 uranium mills at these 11 operations have a total 
milling capacity of about 2.4 million mt/yr. 

As a group, the estimated operating costs at the 11 
operations have a wide range, from $4.29/mt to $12.18/mt 
ore milled. This larger group can be split into two smaller 
groups for comparison. The first group would comprise the 
five operations that have their own pyrite and H 2 S0 4 pro- 
duction facilities, and the second group would consist of the 
six properties that have either a pyrite production plant or 
an acid plant or neither. The first group has estimated 
operating costs ranging from $4.29/mt to $12.18/mt ore feed 
with an average of $9.13. The six operations in the second 
group have estimated operating costs ranging from $4.78/mt 
to $9.56 mt, with an average of $6.11. Labor costs in the 
first group range from 27 to 54 pet of the total mill operating 
cost with an average of 40 pet. Labor costs in the second 
group are markedly lower with a range of 23 to 38 pet and 
an average of 31.5 pet of total mill operating cost. 

Low-Grade Milling 

The last major milling category for discussion involves 
the various methods being used to produce gold, uranium, 
pyrite concentrate, and sulfuric acid from old sands and 
slimes dump materials left over from prior milling opera- 
tions and from the reprocessing of the slimes from current 
milling operations. Basically, all of these operations can be 
combined under one major category broadly defined as low- 
grade milling. 



As noted earlier, 2.077 billion mt of the total 
demonstrated resource evaluated in this study represents 
surface material (old sand dumps, old slimes dams, and cur- 
rent tailings) at an average recoverable grade of 0.21 g/mt. 
Table 24 contains data on the composition of this 
demonstrated surface resource. The resource is comprised 
of 1.164 billion mt at 0.29 g/mt recoverable gold at the six 
major reprocessing operations that have come into produc- 
tion since 1977; 0.289 billion mt at 0.18 g/mt recoverable 
gold contained in old dumps and dams at 10 of the major 
underground operations; and 0.624 billion mt at 0.08 g/mt 
recoverable gold contained in current mill tailings that are 
being reprocessed as of 1983 at the major operations. 

These three sources, which comprise the demonstrated 
resource of surface material analyzed in this study, are the 
only material committed to reprocessing as of the early 
1980's and contain an estimated 14.06 million tr oz of 
recoverable gold. Two additional sources that were not in- 
cluded in the analyzed demonstrated resource could account 
for close to 27 million tr oz of additional gold production 
in future years. These sources are (1) material in old sand 
and slimes dumps that was not committed to production as 
of 1982-83 and (2) the current slimes that will result from 
the milling of about 2.364 billion mt of the underground 
demonstrated resource and that were not committed to 
reprocessing as of 1982-83. 

The six evaluated reprocessing operations split into 
three groups: those that produce pyrite concentrate along 
with gold bullion, those that produce only gold bullion, and 
those that produce gold bullion, pyrite concentrate, sulfuric 
acid, and uranium. Table 25 summarizes the breakdown 
of the six operations by products along with ore feed 
capacities and weighted-average feed grades. As shown, the 
three operations producing only dore bullion are relatively 
small with ore feed capacities ranging from 565,000 to 
840,000 mt/yr and averaging 690,000 mt/yr. 

All three of these operations are reprocessing only sand 
dump material grading 1.0 to 1.1 g/mt. The one operation 
producing a pyrite concentrate along with dore bullion is 
processing both sand dump material grading about 1.0 g/mt 
and slimes dam material grading close to 0.45 g/mt with 
high sulfur grades at 1.7 wt pet. At 6.58 million mt/yr, it 
is a much higher capacity operation than those that proc- 
ess only the higher grade sand dumps. 

The largest capacity reprocessing operations are those 
that are treating only slimes material, either from reclama- 
tion of old dam material or from retreating the tailings from 
current milling operations. Because of the low grades of the 
feed material being treated (0.25 to 0.66 g/mt) and low gold 
recoveries (30 to 50 pet), these operations have to be large- 
scale, low-cost operations. They must rely heavily, if not 
predominantly, on the revenues from production of pyrite 
concentrates, sulfuric acid, and especially uranium. As of 
the early 1980's, uranium contents (U) in the feed were 46 
to 107 g/mt, while sulfur (S) contents ranged from 0.7 to 



Table 25. — Mill characteristics of six low-grade surface waste reprocessing operations in South Africa 



Producti 



Number of 
operations 



Operation capacities. 10 3 mt/yr 



Range 



Average 



Weighted-average 

feed grade. 
fl/rnt 



Pyrite conce'"i , 'i 
and dore bullion 

Dore bullion only 

Dore bullion, pyrite con- 
'.-. oe'-ate, h 2 S<V 
J3P8 



NA 
565- 840 



19.200-23.400 



8 560 

690 



21.300 



0.59 
1 04 



40 



'.£ Not s-a a^ e 



30 



1.0 wt pet. Recoveries of uranium were low (27 to 35 pet), 
and sulfur recoveries were fairly high (75 to 80 pet). Based 
on the data evaluated for this study, it appears that gold 
recoveries are 70 to 75 pet when retreating the higher grade 
sands (0.9 to 1.1 g/mt) but drop to 30 to 45 pet with the much 
lower grade slimes material (less than 0.40 g/mt). 

The economics of the low-grade operations evaluated in 
this study are very precarious and in some cases are highly 
dependent on byproduct revenues. All of the operations have 
been brought into production since 1975, during the period 
of large increases in the price of gold. Yet, even if the 
economics of the low-tonnage milling operations were ex- 
cellent and all of the possible materials were processed, they 
still would account for only about 40 million tr oz of total 
gold production over the next 25 to 40 yr. When compared 
with the recoverable gold in the demonstrated underground 
resource in South Africa (approximately 702 million tr oz), 
it can be seen that the overall importance of these retreat- 
ment facilities to long-term gold availability from South 
Africa is not significant. 

A final comment should be made about the most press- 
ing issue regarding gold milling in South Africa: labor pro- 
ductivity. With present practices, the primary gold mills 
of South Africa are very labor intensive relative to other 
gold mills around the world. If one uses a subset popula- 
tion of 20 of the 24 mills producing only gold with the 
Merrill-Crowe-zinc dust precipitation method, this study 
estimates that these 20 mills require approximately 25,134 
employees to mill about 38.7 million mt/yr ore. If it is as- 
sumed that an average of 300 shifts are worked per 
employee per year, then the indicated productivity of the 
20 mills is about 5.1 mt ore milled per shift. This produc- 
tivity level is significantly lower than that of the lowest 
productivity vat leaching mills in the United States, which 
ranges from 10 to 20 mt per worker-shift. 

It is very difficult to obtain a detailed breakdown of 
employment that is directly attributable to the milling stage 
at all of the South African gold mines. For that reason, the 
above estimates of South African mill labor productivity 
may be lower than actual productivity because they include 
workers who normally would not be accounted to the mill- 
ing stage in other countries, such as the United States. 
Nonetheless, it is felt that this 5.1-mt-per-worker-shift pro- 
ductivity estimate is not more than 50 pet lower than what 
is actually the case. A major reason for the lower produc- 



tivity is that a great deal of hand sorting of waste and ore 
is performed at South African gold mills, averaging 20 to 
40 pet of the total material hoisted. 

If a typical U.S. mining wage rate were applied to the 
employment levels in practice at the South African gold 
mills in the early 1980's, a rough indication is that a $6/mt 
mill operating cost would increase to about $19.41 owing 
to increased labor costs alone. However, in contrast to the 
same hypothetical situation posed in the mining section, 
the employment levels at South African gold mills are felt 
to be much more controllable due to technology. 



Refining and Transportation 

All of the gold products from the 44 operations evaluated 
in this study are in the form of gold-silver dore bullion. 
Typical South African dore bullions average 98 pet com- 
bined gold plus silver, with 2 pet base metals such as Cu, 
Pb, Zn, and Fe. Typical South African dore bullion is very 
high in gold content at about 87 to 94 pet gold with the silver 
content varying from 4 to 11 pet. All of the gold bullion pro- 
duced in South Africa is refined at the Rand Refinery in 
Germiston, about 15 km south of Johannesburg. The 
refinery was first constructed in 1921 with an initial design 
capacity to refine 12.0 million tr oz/yr gold. The refinery 
was expanded until peak production of 32.395 million tr oz 
of fine gold was reached in 1970, at which time this single 
refinery produced approximately 75 pet of total MEC pro- 
duction of fine gold (16, p. 204). Extensively modernized in 
1965 when it was nearly 40 yr old, the refinery is fully 
capable of handling any foreseen increase in production that 
may occur in South Africa. 

The Rand Refinery Ltd. Corp. is a cooperative service 
company established for the gold mining industry of South 
Africa (16, p. 205). It does not purchase the bullions and 
other precious metal bearing materials from its members, 
but rather, processes them for the members. Thus, the costs 
of refining, insurance, and security are the only costs in- 
curred by the member firms of the cooperative, which in- 
cludes all of the major gold mining companies in South 
Africa. The Orange Free State Goldfield mines are the far- 
thest distance from the Rand Refinery (250 km by road), 
the Eastern Transvaal mines are about 200 to 225 km by 
road from the Rand Refinery. 



UNITED STATES 



HISTORICAL PERSPECTIVE 

Total mine production of gold in the United States from 
1799 through 1983 is estimated at 335 million tr oz. It is 
further estimated that a rough breakdown of this total pro- 
duction into the three major ore sources would be as follows: 
primary gold deposits, lode mining— 175 million tr oz (52 
pet); primary gold deposits, placer mining— 115 million tr 
oz (34 pet); byproduct gold deposits, lode mining — 45 million 
tr oz (14 pet). 

The earliest significant recorded gold find in the United 
States was made in Cabarrus County, NC, in 1798. A year 
later, gold was discovered in Stanley County, NC, and the 
first U.S. "gold rush" was underway. From 1799 through 
the 1840's gold was produced from placers and weathered 
bedrock in the Appalachian Mountain region, mostly from 
workings in northern Georgia and central-southcentral 



North Carolina. With the news of the discoveries in north- 
ern California in 1847-48 many of the gold miners in the 
Appalachian goldfields headed westwards, and eastern gold 
production dropped off. 

The discoveries in northern California proved to be ex- 
tremely rich, but by the late 1850's, the smaller placer 
claims had been worked out and laws governing mining by 
hydraulic methods had been passed. Thus, many of the 
"49ers" began to move into the interior of the Western 
United States in search of new goldfields. This migration 
resulted in the opening up of the Comstock Lode and 
Tonopah districts in Nevada in 1859 and 1860, the Clear 
Creek discovery in Colorado in 1859, and numerous other 
discoveries, mostly in Idaho and Montana, during 1861 
through 1866. 

Up to the early 1870's, most gold production came from 
easily mined placer deposits, but in the 1870's underground 



31 



mining of lode gold deposits began to play a major role in 
the gold industry, especially in Colorado. This was a direct 
result of three major factors: the importation of experienced 
underground miners from the tin mines of Cornwall, 
England; the increased use of steam engines in mining; and 
the use of dynamite, which was invented in 1866. The 
decade of the 1870's was notable for the discovery of the 
famous Homestake Lode in South Dakota and the many 
gold and silver districts of Colorado. However, it was evi- 
dent by the late 1870's that discoveries of major, new, 
unknown gold districts in the Western United States were 
becoming scarce. In the early 1880's the news of placer gold 
discoveries in Alaska began to draw attention; the first 
discoveries there had been made as early as 1848 on the 
Kenai Peninsula and in 1870 along the coast just south of 
the present city of Juneau. 

Discussion of the historical significance of gold in the 
United States begins with the discoveries in California in 
1847-49. This was the first find in the United States that 
was large enough in terms of new gold supply to affect the 
world's monetary system. 

It has been estimated that average annual world pro- 
duction for 1840-49 (prior to the California discoveries) was 
only 1.76 million tr ozyr, while average annual world pro- 
duction for 1850-59 (the time of major production in the 
California fields) was 6.4 million tr oz/yr (4, p. 29). This 
366-pct increase in annual world production (4.5 million tr 
oz I can be assumed to represent production from Califor- 
nia since the major Australian, South African, and Cana- 
dian discoveries either had not been made or were just be- 
ing made at the end of the 1850's. This indicated level of 
annual production in the California fields during the 1850's 
was an enormous amount and meant that when the in- 
evitable decline occurred in California, total U.S. produc- 
tion would likely decline in proportion. As mentioned, 
discoveries of new districts in Nevada, Colorado, Montana, 
and Idaho did occur during the 1860's and 1870's; however, 
these discoveries were insufficient to make up for the lost 
California production, and by 1890 total U.S. gold produc- 
tion had fallen to around 1.7 million to 1.8 million tr oz/yr 
(17, p. 265). 



From 1890 to 1905, a sustained rise in annual gold pro- 
duction occurred in the United States with production 
reaching 4.6 million tr oz by 1906 (18, p. 580). About 1.0 
million of this 2.8-million-tr-oz increase represented in- 
creased Alaskan production (mostly placer) during the great 
Alaskan "gold rush" (19, p. 35). The remaining 1.8 million 
oz of added annual production was mostly from "primary" 
gold operations and probably reflected both a maturation 
and further development of the fields discovered in the 
1860's and 1870's. Additional production also came from 
small operations because of the fixing of the gold price, 
which legalized the free trade of gold and allowed currency 
transactions among nations to be settled in gold. 

Figure 16 shows U.S. gold production by the three ma- 
jor ore sources from 1905 through 1983 (20). Several points 
of interest are— 

1. The two precipitous drops in production, in 1915-20 
and 1940-45, both correspond with major World Wars. 

2. Placer production is no longer a significant factor in 
overall U.S. production of newly mined gold. 

3. Production of gold from base metal ores (essentially 
byproduct gold production) has ranged from a low of 50,000 
tr oz/yr in 1933 (the depth of the Great Depression) to highs 
of 600,000 to 750,000 tr oz/yr. The highest sustained pro- 
duction levels from base metal ores occurred during the 
period from 1947 through the 1960's. It appears that the 
base level of production during normal economic periods has 
been about 300,000 to 500,000 tr oz/yr gold, with 500,000 
to 750,000 tr oz being produced during good economic 
periods. 

4. Primary gold production since 1943 has never at- 
tained the high levels achieved by the many "small" opera- 
tions in 1905-15 and 1935-44 because of social, political, 
legal, environmental, and market changes. 

Figure 17 gives a breakdown of recent U.S. gold pro- 
duction for 1968-83. As shown in this figure, production 
from all three sources— primary lode, byproduct base metal, 
and primary placer deposits— steadily decreased from 1970 
through 1979, with total annual mine production of gold 
in the United States falling 47 pet, from 1.7 million tr oz 
in 1969 to 920,000 tr oz in 1979. Primary lode production 



T 



3 - 



'Base metal ores 



O 




Projection to 1990 




1905 I9t0 1915 1920 1925 1930 (915 1940 1945 1950 r955 I960 f965 1970 1975 r980 1985 1990 



Figure* 16. — U.S. goW production by or* oourco, 



32 




Figure 17.— U.S. gold production by oro source, 
1908-83. 



decreased the most, on a percentage basis, with a decline 
of 50 pet from 1.0 to 0.5 million tr oz. Byproduct gold pro- 
duction fell by 42 pet, from 693,000 to 400,000 tr oz, while 
placer production fell 33 pet, from 30,000 to 20,000 tr oz, 
over the same period. 

Since 1979, U.S. gold production has increased every 
year, resulting in a 100-pct increase in annual production 
over the last 4-year period. The great majority of this in- 
crease has come from primary lode deposits since byproduct 
production from base metal deposits has declined. However, 
even after this doubling of gold production, 1983 output is 
still only 6.6 pet larger than 1969's level— despite 14 yr of 
exploration and development activities during a period 
when the price of gold increased nearly 900 pet in nominal 
terms and nearly 400 pet in real (1981 dollar) terms. 

Placer production has enjoyed a modest increase dur- 
ing the 1980's, but placer production is not expected to com- 
prise a substantial portion of total U.S. gold production 
given continuation of the current price level. 

Byproduct gold production from base metal ores declined 
steadily from the late 1960's to the early 1980's. This 



decline, however, reflected a drop from an historically strong 
period of base metal production due to the boom period of 
the 1950's and 1960's, rather than a decrease from a "nor- 
mal" level. The level of gold production from base metal 
ores has remained fairly constant between 300,000 to 
500,000 tr oz/yr for the past 10 yr, a level very similar to 
that experienced during the early years of the 20th century. 
Also, for the past 10-yr period, average production has been 
about 400,000 tr oz/yr, which compares with an average of 
450,000 tr oz/yr over the last 80 yr. 

For the foreseeable future, it is expected that the level 
of gold production from byproduct ores in the United States 
should range between 300,000 to 500,000 tr oz/yr, but a 
strong resurgence in domestic copper production could 
result in a range of 500,000 to 700,000 tr oz/yr by the year 
2000. These predictions are highly dependent upon the pros- 
pects for the U.S. copper industry, which has typically ac- 
counted for 83 to 87 pet of byproduct gold production for 
the last 15 yr. This industry is presently under severe 
economic pressure, and future production potential remains 
uncertain. 



33 



RESOURCE OVERVIEW, 1984 

All of the largest and most significant primary gold pro- 
ducers in the United States, as of January 1984, were sub- 
ject to a complete geologic, engineering, and economic cost 
evaluation in this study. This study defined 17 primary gold 
mining operations in the continental United States that 
were in production during 1983 and that represented in ex- 
cess of 90 pet of total primary gold output. One of the opera- 
tions closed down in late 1983 and was not subject to futher 
cost or availability evaluation. The 16 primary gold pro- 
ducers in the continental United States as of 1984 are listed 
in table 26. Figures 18 through 20 show the locations of the 
16 major producing operations, prospective gold mines, and 
areas of primary gold deposits. 

In 1981, six primary copper operations producing geld 
as a byproduct were ranked among the top 25 U.S. gold 
producers. As of 1983, three of these six byproduct gold pro- 
ducers had closed down indefinitely owing to depressed cop- 
per prices. The largest byproduct gold producer (Bingham 
Canyon, UP has significantly reduced production, also 
indefinitely. 

During 1981, two primary lead-zinc mines producing 
gold as a byproduct also ranked in the list of top 25 pro- 
ducers. By 1983, one of these mines had also closed in- 
definitely. Because of the very uncertain future of U.S. 



Table 26.— Distribution of 16 major primary gold 

producers in the continental United States, by State 

and type of mining 



Stale and Operation 

Colorado: Victor Project 

Idaho: West End-Garnet Creek 

Montana: 

Golden Sunlight 

Zortman-Landusky 

Nevada: 

Alligator Ridge 

Battle Mountain 

Borealis 

Carlin 

Jerntl Canyon 

Pinson-Preble-Ogee 

Round Mountain 

Windfall 

New Mexico: Ortiz 

Utah: Mercur 

California Yuba Placer 

South Dakota: Homestake 

'S-surface. SD-surface (dredging), U-underground 



Type' 
S 
S 



S 

SD 
U 






vmiju**) 




/y* 




°* 
















ROFTS^- 


J^oc^7~~ C 






V t * .A 

In y f 


' 1 "*■ ) 
1 ° ( 














j o l 


1/ \ *j 






i I 








1 tu \ 


Detroit / 






\ ■* / 




MICHIGAN 







LEGEND 
• Cities 

X Costed, producing gold mines 
K Noncosted, producing gold mines 
X Costed, prospective gold mines 
H Noncosted, prospective gold mine* 



K» 



V.rf«, km 



Figure 1 8. — Location of producing and prospecth/e gold 
mining operations In the continental Untied States. 



34 



DEE (BOULDER 
CREEK)* 



..JERRITT 
" CANYON 



£CARLIN 

BATTLE MOUNTAIN 

« a HORSE CANYON 
^RELIEF 

C * NY0N ALLIGATOR 

BUCKHORN ROGE 

* ** 

PARADISE PEAK * ,N ° FALL 
K 




LEGEND 
• Cities 

ft Cojted, producing gold mints 
ft Noncosted, producing gold mines 
X Costed, prospective gold mines 
H Noncosted, prospective gold mines 



200 

I 



StoSa.hm 



Figure 1 9.— Location of producing and prospective gold 
mining operations In California and Nevada. 




LEGEND 

Areas of primary Mesozoic 
gold deposits 

(J2Z5 Areas of primary Cenoroic 
gold deposits 

(cd^S Areas of primory Paleozoic 
gold deposits 



Scale, km 



Figure 20. — Areas of primary gold deposits in the con- 
tinental United States. 



35 



Tabla 27 — Gold raaotirca data (or aalactad primary gold minaa and dapoaita in tha contlnantal Unitad Slataa aa of January 1984 



Class.' calO" 



Number 01 
propen.es 



Demonstrated resource' 
)• -nt Share pet 



Contained 9010" 



Recoverable gold 



10* tr oi 



Share, pel 



Share pel 



Maic proc^c ng operations 
S.-ace 
Unoergrouna 


15 


64' 
48 


93 


29 
85 


23 


21 6 
80 


73 
27 


Total 


16 


695 


100 


37 5 


100 


296 


100 


Other mines ano oeoos ts •' 
Gonad 
Surface 

Unoergrouna 


5 
1 


655 

25 


96 

4 


5 13 
37 


93 

7 


4 47 
33 


93 
7 


Toiai 

Nonces! ec J 


6 

•8 


66 

NM 


100 
NAD 


55 
9-12 


100 

NAo 


48 
NM 


100 
NAp 


Total 


24 


NM 


NAp 


145-17S 


NAD 


NM 


NAp 


Granc -ota-s 

Demonstratea icosteal 

- e _.- s .. 3 . e . - _ s -^-^s^yc 


22 

40 


763 

NM 


NAo 
NAp 


43 

52-55 


NAp 
NAp 


34 4 

NM 


NAp 
NAp 



Si; •.;' i:: ;ar <? 

'Mm -eea pas s iouoes aoiustments 'or mining -ecovery ana aiiution 

:z : re-a :- -a— es i~z r-cv:-c'c- s^'-s s«* ace 3; 

>Not suOfecteo to complete oemonstrateo resource ana long-term total cost evaluation 

copper producers and to a lesser extent lead-zinc producers, 
and because gold production from these mines is a result 
of base metal mining itself and not a driving cause, no fur- 
ther attempt was made to address the potential availability 
of byproduct gold production from copper or lead-zinc mines. 
All significant domestic copper and lead-zinc producers have 
been evaluated in detail in other MAP appraisals (21-22). 

The 16 major primary gold producing operations in the 
continental United States as of 1984 represent at least 38 
individual deposits. This is because 10 of the 16 operations 
are mining or will mine from 2 to 5 individual deposits over 
the life of the operation as defined by the current level of 
demonstrated resources. 

Table 27 provides aggregate resource data for the 16 
major producing operations and for 24 other properties 
(figures 18 and 19 show locations) that are either nonproduc- 
ing, developing, or in the early stages of production. The 
resource data for the 16 major producers were estimated 
at the demonstrated level. The 24 other properties that are 
included are those considered as the most likely candidates 
for full development during the 1984-90 period. Six of these 
24 properties were subject to complete demonstrated 
resource and cost evaluation to determine the near-term 
economics of new gold production in the United States. For 
the 18 noncosted properties, the estimates of contained gold 
are presented as a range to indicate the lower level of prob- 
ability that is attached to them in the absence of a com- 
plete demonstrated resource evaluation. 

In total, primary recoverable gold resources in the con- 
tinental United States as of January 1984 are estimated 
to range from 43 million tr oz demonstrated resource con- 
tained in 16 producing and 6 nonproducing operations to 
as high as 55 million tr oz if the 18 noncosted properties 
of significance are included. 

The great majority OS pet) of demonstrated resource 
(mill feedi in the 16 major producing operations is surface- 
minable ore. Only 7 pet occurs as underground ore. Higher 
ore grades and recoveries for the underground resource 
result in 27 pet of total recoverable gold being represented 
by underground ore. Still, the majority of recoverable gold 
represents a surface resource. Of the six costed non 
producers, only one is a potential underground mine; it 
represents 7 pet of the contained and recoverable gold in 
this category. The United States is expected to remain 
highly dependent upon surface-minable gold resources. 

Primary gold resources in Alaska, contained within 1H 
known, relatively major 'mostly placer; operations of 
mittent production status, are estimated to be 4 million tr 
oz, a probability of 50 pet is attached to this difficult-to- 



ascertain figure. Byproduct gold resources in all of the 
United States may be as high as 20 million tr oz, with 
roughly half of this total contained in the Bingham Canyon 
Mine in Utah. Total U.S. gold resources, therefore, from 
both primary and byproduct sources, are estimated to range 
from a high-probability (demonstrated) estimate of 43 
million tr oz in 22 major primary properties to a lower prob- 
ability estimate of 79 million tr oz if all known primary and 
byproduct sources of significance are included, regardless 
of production status. An independent estimate by 
Homestake Mining (23) places primary gold resources in 
the United States (assumed to include Alaska) at 69 million 
tr oz. This estimate includes all major producers and well 
over 100 explored prospects. The difference between this 
study's potential primary gold resource estimates and the 
Homestake estimate is due entirely to a difference in defini- 
tion concerning which properties and how many properties 
to include in the total estimate. Interestingly, the percen- 
tage split between gold contained in surface and 
underground ore is the same, even though the Homestake 
estimate includes many more surface properties and a 
higher estimate of gold resources at the Homestake 
underground mine at Lead, SD. 

As a final note, given that large areas of Alaska and 
the Western United States have not been thoroughly ex- 
plored for their gold potential, it is felt that gold resources 
could be as high as the 100-million-tr-oz level published by 
Lucas (1). This rounded figure is considered to be an inferred 
upper range. In contrast, the resource data herein reported 
on and evaluated are "locateable" by known deposit and/or 
operation. 

TOTAL GOLD AVAILABILITY AND 

PRODUCTION COST EVALUATION: 

16 MAJOR PRODUCERS 

The 16 major producers account for over 90 pet of all 
primary gold production and a majority of total production 
in the United States as of 1983. As shown in table 27, these 
16 operations in total contain an estimated 695 million mt 
of demonstrated resource (mill feed) which contains 37.5 
million tr oz of gold. As of January 1984 there is an 
estimated total refined gold availability of 29.6 million tr 
oz contained within all 16 operations. The five largest opera- 
tions (Homestake, Carlin, Round Mountain, Battle Moun 
tain, and Jerritt Canyon) contain 83 pet of the total 
erable gold. These same five operations, not surpris 
ingly, account for at least 50 pet of total annual primary 



36 



600 




TOTAL RECOVERABLE GOLD, lO^troz 

Figure 21 .—Potential total U.S. gold available at various 
production cost levels from 16 major producers as of 
January 1984. 

Table 28 — Supporting data for figure 21; total gold potentially available from 16 major producing operations in 

the continental United States 





Break-even 


DCFROR 






10-pct DCFROR 




Cost or price 
level, per 
troy ounce 


Available gold, 

10 3 tr oz 

(cumulative) 




Number of 

mines 
(cumulative) 


Available gold, 

10 3 tr oz 

(cumulative) 




Number of 

mines 
(cumulative) 


$200 or less 
$300 or less 


2,311 

4,957 




2 

4 
11 
15 
16 


162 

4,957 

20,140 

22,313 

29,594 




1 
4 


$400 or less 


20,140 


11 


$500 or less 
Over $500 . 


29,556 

29,594 


14 
16 








DCFROR = 


discounted cash flow rate of return. 













gold production. The six costed nonproducers are estimated 
to have potential recoverable gold totaling 4.8 million tr oz. 

Figure 21 and table 28 present the total gold availability 
estimates and long-run total cost determinations for the 16 
major producers. Long-run production costs were deter- 
mined at the break-even (0 pet) and 10-pct rate-of-return 
levels. Fully two-thirds of the total gold is available from 
11 operations at a cost-price level of $400 or less. These 11 
operations (10 surface and 1 underground) are able to realize 
a long-run rate of return of at least 10 pet given a gold price 
of up to $400/tr oz. 

Only four operations can break even at a cost-price level 
of $300/tr oz or less; these same four can realize at least 
a 10-pct long-run rate of return at the $300 cost-price level. 
Fifteen operations can break even, and 14 can realize at 
least a 10-pct long-run rate of return, at a long-run cost- 
price level of up to $500/tr pz. 

The profitability of the 16 major producers and the 6 
costed nonproducers is also demonstrated by the data of 
table 29, which contains rate-of-return determinations at 
constant-dollar gold prices of $400/tr oz and $500/tr oz. At 
a constant-dollar gold price of $400, 11 current producers 
have profitable rates of return ranging from 13.5 pet to over 
120 pet. None of the six costed nonproducers is profitable 
at a constant-dollar gold price of $400/tr oz given the criteria 
of this analysis (i.e., more than a 10-pct ROR). 

At $500/tr oz, 14 of the major producers and 3 of the 
nonproducers are profitable. One producer (surface mining) 
and three nonproducers (two surface and one underground) 
require constant-dollar gold prices in excess of $500/tr oz 
to be profitable according to the criteria of this analysis. 
The three nonproducers that are not profitable at $500/tr 



Table 29. — Long-run DCFROR for selected U.S. gold 

properties, determined at $400 and $500 per troy 

ounce gold, $10 per troy ounce Ag, and a 10-pct 

discount rate 



Gold price, 
per troy ounce 


Number of 
operations 


DCFROR range. 1 
pet 


16 PRODUCERS 


$400 

$500 


11 
5 

14 
2 


13.5-120.0 

.0 

11.0-120.0 

.0- 9.8 


6 NONPRODUCERS 


$400 

$500 


6 
3 
3 


0.0- 7.4 

12.5- 15.0 

4.0- 8.0 



1 The economic model does not calculate rates of return below or above 
120 pet. 

oz all have long-term operating cost estimates above $350/tr 
oz recovered gold. The three nonproducers that are pro- 
fitable at $500/tr oz (all surface operations) have operating 
costs below $250/tr oz recovered gold. The weighted-average 
operating cost for all five surface nonproducers that were 
cost-evaluated is estimated at $254/tr oz recovered gold; not 
suprisingly, the profitable operations are those with costs 
below the average, while the nonprofitable operations have 
costs well above the average. 

Given current (late 1984) gold prices below $350/tr oz, 
all six of the evaluated nonproducers have long-run cost 
levels, over the life of the operations, that would result in 
real economic losses, especially given that typical mine lives 



Table 30. — Compirfthn summary results of 1984 long-ran coat determination analyses for 
producing and nonproducing aurfaca operatlone in the continental United States 



37 













NonprofluC nq 








Produc 


no 














(5 


operationsi 








is operations! 














Weignteo 










w«ioniiM 








Range 






average 


Ra 


ige 






tvsragt 


Ocwaic-a* Jaia 


























V i - eea g-ace' 




g/mt 


20- 


48 






40 


08- 


79 






22 


Average ar>n„ai output 


10' 


10- 


125 






NAp 


6- 


268 






NAo 


*:'j -eccve r 3r e 


go>o J 


10> If 02 


94- 


2 628 






NAp 


38- 


7.243 






NAo 


D 'cc^c ~g .eas 


-om jan 1984 
























':■ ?C re : - 


s ooeratc-s 




7- 


10 






NAp 


3- 


10 






NAo 


Car 'a 3-c rre-3' -g 


rest ra:a 
























";-3 rax ! -e- ,J 


10* OoHars 


S6- 


$165 






NAo 


$5 


$356 






NAo 


Car '3 rrs: re' ■ 


r> r.-re 




$63 


596 






S?S 


$21 


$126 






$47 


Cre-r -g :rs:* re- --r. r.-re 




$1'5 


S3'0 






$254 


1117 


-5401 






$271 




_s rar ta res - re r foy ounce 




$271- 


$445 






$329 


$152 


-$527 






$318 


.;-;•-- \- , 3 rrs: re 


.-re 
























B-ea'-e'.e- hxa 


x?=c = 




$329 


$458 






$351 


$1-3 


$538 






$354 


•:-:.- ZZ ZS C S 






$«9 


$sr- 






$J6B 


$180 


-5567 






s.w 



sad v*oi aopKao'e 

'** •' 'eea g-aces 'o r ear- -c > c.3 r-openv a'e we'g'veo-average graaes o< the entire aemonstrateo 'esoufce mmaDia over the i<f« ol each operation These nrjiviouai property grades are 
-*- •«* ;-'-3.e'3cec r.e' eac- s-rc/r-r - c rr-ra- mi 
•fletroeo goK) esfmatec 'o re -ecoveraDie as ol ^an 1984 

HH ana eauipment. ntrastruclure. ana aevelooment remaining as ol Jan 1984 olus reinvestments through life ot operation 
I plus milling cost per ;roy ounce ol njfineo, goto 



average only 5 to 8 yr. One possible exception is the 
McLaughlin operation in California, which has an initial 
20-yr life, large planned annual capacity, and hence the 
potential to alter its mining and development plans to ac- 
commodate depressed prices, at least during the near term. 
For current producers, the maintenance of a $350 gold price 
would place 9 of the 16 operations (including 6 heap leaches) 
in a position of suffering a real economic loss and possible 
eventual closure. This could reduce expected average an- 
nual output by the late 1980's by up to 50 pet. In addition, 
current Gate 1984) gold prices have at the very least delayed 
the eventual development of many of the 24 nonproducing 
properties included in this discussion, including 5 of the 6 
nonproducers that were cost-evaluated. 

The following section continues with an in-depth 
analysis of the comparative economics of current surface 
producers versus potential or developing surface mines. 

Comparative Long-Run Total Production Costs 

Table 30 contains economic summary data for the 15 
surface producing and 5 surface nonproducing operations 
that were evaluated to determine comparative economics 
of new gold production in the United States. The five non- 
producing surface operations are believed to adequately 
cover the range of most prospective future producers. In ad- 
dition, the estimated average mill feed grades, productive 
lives, and capital and operating costs per ounce of recovered 
gold fall within the ranges established by the 15 major sur- 
face producers. These new operations are, in effect, a 
replacement resource similar to that being currently mined. 

The major difference between current and prospective 
producers lies in total capital investments. For the non- 
producing properties, total capital investments, by necessi- 
ty, include the costs of initial development, construction, 
and purchase of new plant and equipment and related in- 
frastructure, as well as the estimated costs of capital 
reinvestments over the life of the operation. These I 
range, in total, from $6 million to $156 million for the 
development of surface mines capable of producing between 
10,000 and 125,000 tr oz/yr gold. The majority of new sur- 
face mines (three of the five in this sample) will have an- 
nual outputs below 50,000 tr ozyr and total capital in- 
vestments below $50 million. 

For current producers, the major initial capital in- 



vestments have mostly been recovered through past pro- 
duction by 1984. Most of the capital costs remaining are 
those associated with future reinvestments or expansions 
to capacity. The most notable example of expansion is the 
Carlin operation in Nevada, where the Gold Quarry deposit 
is undergoing full development. The initial cost to fully 
develop this deposit is estimated to exceed $130 million in 
January 1984 dollar terms. Eleven of the 15 producing 
operations have total required capital investments and 
reinvestments as of January 1984 below $50 million. 

Of particular interest is the fact that even though the 
five nonproducing operations range from 10,000 to 125,000 
tr oz potential annual output, requiring between $6 and 
$165 million to fully exploit, capital costs on a per ounce 
of recoverable gold basis fall within the narrow range of 
$63/tr oz to $96/tr oz. This range probably represents an 
economic threshold of expected per-ounce capital costs for 
the development of new surface gold mines in the United 
States. Any prospective operation that falls significantly 
above the upper limit of this range will be less attractive 
for development (especially given that a majority of total 
capital investment is made prior to production) unless there 
is an expectation of a compensatingly lower than average 
per-ounce operating cost. Operating costs for both groups, 
however, show wide variation between operations, even 
those of similar size. This is not surprising given that each 
mine has unique characteristics regarding its geologic or 
technical and operational parameters. 

The difference between total capital plus operating costs 
per ounce of recoverable gold and the break-even cost-price 
level is greater for current producers owing primarily to 
greater tax liabilities. Total break -even production costs for 
the 15 surface producers range from $173/tr oz to $538/tr 
oz. This range encompasses that derived for the non 
producers; as a result there is no significant difference be- 
tween the two groups in terms of the weighted-average long- 
term total production costs at the breakeven level. 

A significant difference in total production costs is evi 
dent between the two groups at the 10-pct profitability level. 
All five of the nonproducers require 1984 constant prices 
exceeding $449/tr oz to obtain this prespecified rate of 
return. This large increase in required price is a result of 
the requirement to recover larger total and per-ounc< 
capital costs in less time, and for some, over smaller an- 
nual production levels. 



38 



IB 

1.6 

1.4 

S 12 

Q* 

o 

CD .6 
A 
.2 






* — _0-$500 

X 

0-$400 

0-$300 



1984 



1986 



1988 



1990 



1992 



1994 



1996 



1998 2000 



Figure 22. — Potential annual U.8. gold production 
available at various break-even production cost levels 
from 10 major producers as of January 1084. 



Annual Production Potential 
Through 2000 

As noted previously, the United States is heavily depen- 
dent upon surface mining for maintaining gold production. 
On a relative, worldwide basis, surface primary gold mines 
in the United States (both current producers and those 
awaiting or under development) are generally low-grade, 
short-life operations with annual outputs in the 20,000- to 
90,000-tr-oz-range. There are notable exceptions such as the 
Jerritt Canyon, Round Mountain, Battle Mountain, Carlin, 
and McLaughlin operations. These five operations each pro- 
duce or will produce in excess of 100,000 tr oz/yr gold and 
have remaining productive lives (based on current 
demonstrated resources) extending at least through the 
mid-1990's; three of the five operations are expected to pro- 
duce beyond the year 2000. By contrast, the majority of the 
remaining producing and developing mines, as well as those 
considered most likely for development during this decade, 
generally represent annual production below 60,000 tr oz 
and have remaining or expected productive lives of 5 to 10 
yr. Thus, the United States, unlike Canada or South Africa, 
will have to replace a large part of its demonstrated 
resources every 8 to 10 yr to maintain current production 
levels. 

This section details expected annual production through 
1990 for the 16 major evaluated primary gold producers (as 
of the reference point January 1984) and incorporates 
estimated annual output from those operations that are cur- 
rently under development or in the early stages of produc- 
tion and those that are considered the most likely can- 
didates for development. Two caveats are necessary. First, 
with a large number of small, short-life operations con- 
tinually coming into and going out of production, it is very 
difficult to forecast potential output in any given year. Se- 
cond, estimating output for developing or potential opera- 
tions by necessity involves margins of error because develop- 
ment plans may change, be delayed, or be canceled 
altogether. This has become especially true during the last 
few years as gold price increases have failed to live up to 
the expectations of 1979-80. The purpose of this exercise 
is not to prophesy but rather to indicate the direction of 
future events given current information. The authors do not 
feel that the margins of error inherent in this type of 
analysis are significant enough to violate the basic trends 
and implications. 



Table 31. — Potential annual production estimates for 
16 major primary gold producers in the United States 



Year 



Number of producing 
operations 



Total potential 

annual production, 

10 3 tr oz 



1984 
1985 
1986 
1987 
1988 
1989 
1990 
1992 
1994 
1996 
1998 
2000 



16 

16 

16 

15 

15 

15 

13 

11 

9 

7 

4 

3 



1,378 

1,425 

1,585 

1,555 

1,528 

1,506 

1,398 

1,352 

1,252 

957 

830 

700 



Figure 22 and table 31 present estimates of long-run 
break-even total production cost and annual gold availabil- 
ity, covering 1984 through 2000, for the 16 major produc- 
ing operations that were evaluated. In the case of the Carlin 
operations in Nevada, the developing Gold Quarry deposit 
is included as part of the overall ongoing operation and not 
as a separate developing deposit. 

During 1984-90, annual primary gold output from these 
16 operations is estimated to increase from 1.378 million 
tr oz in 1984 to 1.585 million tr oz in 1986 and then decline 
to 1.398 million tr oz by 1990. During this 7-yr period, three 
operations (two heap leaching and one conventional surface) 
are expected to have ceased production. Also during this 
time, the large Gold Quarry deposit of the combined Carlin 
operations is expected to reach capacity production, which 
will add around 150,000 tr oz/yr to total output. The addi- 
tional output from the development of Gold Quarry will 
compensate for the three smaller operations that are ex- 
pected to be fully exploited by 1990. 

During the period 1990-2000, total production is ex- 
pected to further decrease as current demonstrated 
resources are depleted. In the absence of additions to 
demonstrated resources, 10 more operations are expected 
to close by the year 2000, leaving 3 of the 16 current pro- 
ducers still active after that time. Total production in 2000 
from these three large operations will still represent 51 of 
1984 production. This illustration underscores a basic 
characteristic of the U.S. gold mining industry: Most of the 
operations are small and their lives are relatively short, 



Table 32. — Operations considered possible or probable producers during 1984-90 



39 



Siais end operation nam* 



M'rtmg method 
and ore type' 



Status 



Estimated annual 
capacity, to' tr oi 



Estimated first lull 
year ol production 



NEAR-TERM PRODUCERS AND PROSPECTS 



Cs ':'- 3 

Grey Eagte .... 

Jamestown 

Mesqu-te 

Pach GuWi 

Idaho 

Thunder Mountain 

Montana 
Seal 
McMioi T uondB 

rada 

Bock horn 

Dee (Boulder Creek) 
Horse Canyon 
Paradise Peak 
Rei>el Canyon 

Ruoy H.» 

Sante Fa 

Sumtch 

South Dakota Annie Creek 

Wash' ^gi on Cannon 

Subtotal (rounded) 



OP milting ore 

do 
OP heap leach 
OP milling ore 



do 
do 



do 
do 



OP heap leech 

do 

do 
OP milting ore 
OP heap leach 
UG milling ore 
OP heap leach 
UG milling ore 

OP heap leach 

UG milling ore 

NAp 



Initial production 1983 

Developing 1984 

Development decision expected late 1984 

Feasibility study completed in early 1984 



Initial production 1983. expanding 1984 
Feasibility study underway 1984 



Feasibility study underway 1964. 
do 



Initial production mid- 1964 
Developing 1984 
Initial production late 1963 
Feasibility study underway 1984 
Developing 1984 
Feasioility study stage 1984 
Feasibility study underway 1964. 
Developing 1964 

Nominal production lata 1963 

Developing 1984 

NAp 



40 
120 

80 
100 



36 
25 



45 
55 



30 
30 
35 
90 
25 
36 
30 
30 

20 

140 
970 



1984 
1985 
1988 
1986 



1984 
1986 



1986 
1967 



1985 

1986 

1984 

1986 

1985 

Post-1967. 

1987 

1986 

1964 

1985 

NAp 



EVALUATED FOR LONGJERM PRODUCTION COSTS 



C a Wu inia 

McLaughan 

Royal-Mountain King 

San Juan Ridge 
Idaho Homestake-Yeeow P**e . . 
M fch sner v Ropes 

Nevada GokJfieid Protect 

Subtotal (rounded) 
Grand total (rounded) 
'OP — open pi. UG— underground 



OP milling ore 

do 
do 
do 

UG mining ore 
OP heap leach 
NAp 

NAp 



Developing 1984 
Feasibility study stage 1964 
Developing 1984 
Explored deposit 
Developing 1964 
Feasibility study stage 1964 
NAp 
NAp 



130 
44 

40 
90 
22 
12 

340 



1985 

Post 1986 

1986 

Post-1987 

1987 

Post-1968 

NAp 

NAP 



which means that the resource base must be constantly 
replaced to maintain current output levels. 

Table 32 lists 24 operations that are either developing 
or considered probable for development between 1984 and 
1990. With only one exception, the list was held to the 
criteria of (1) there is at least 20,000 tr oz annual produc- 
tion potential, (2) the property is at least in the feasibility 
study stage, and (3) there is an initial demonstrated resource 
sufficient for at least 5 yr of production. A tabulation that 
employed more liberal production, resource, or development 
progress criteria, and that included all explored prospects 
for which published information is available, could easily 
list more than 100 properties. 

These 24 operations, in total, represent approximately 
1.31 million tr oz of additional annual production capacity 
that could potentially come on-stream between 1984 and 
1990 if all 24 were indeed developed. Sixteen of the 24 opera- 
tions, representing approximately 1.0 million oz/yr (75 pet 
of the total estimated annual production potential), are con- 
sidered highly probable near-term producers. It is impor- 
tant to stress that 20 of the 24 operations would be surface 
producers, which implies that the United States will con- 
tinue to remain dependent upon surface mining for a 
majority of its gold production. Also, at least one-third of 
the operations will employ heap leaching. Total production 
costs for these 20 surface operations, in general, should not 
be significantly different from those of current surface 
producers. 

The information of tables 31 and 32 is combined in table 
33 to arrive at estimates of potential total annual gold pro- 
duction between 1984 and 1990, assuming constant 
byproduct and placer gold production based upon the 
1977-83 period. No attempt was made to estimate poten- 
tial future byproduct gold production, the majority of which 



Table 33. — Potential annual U.S. gold production 
circa 1 990, by type of operation 



Type ol operation 

Primary: 

Major producers as ol January 1984 

Developing, in early stage of production, or 
considered probable for development as of 
circa 1984:' 
Possible 
Probable 
Placed 
Base metal (byproduct gold) 2 
Totals: 

Possible 

Probable 



Total or range, 
W 3 tr oz 



1.400 



1.310 

1.000 

20- 30 

300-400 

3.140 
2.700 



'Restricted to properties with annual production potential of at least 20,000 
tr oz that are at least in the feasibility stage, and that have a demonstrated 
resource sufficient for at least 5 yr of production 

'Assumed to remain constant at 1977-83 average levels. 



emanates from copper mines, given the very uncertain 
outlook of the U.S. copper industry. Similarly, no attempt 
was made to estimate potential future placer production 
given that the percentage contribution of placer production 
is very low, usually around 2 pet. 

As shown in table 33, output by 1990 is expected to ap- 
proximate 2.7 million tr oz, assuming that the 1.0 million 
tr oz of new production considered highly probable is 
developed and output of current producers is maintained. 
If all 24 operations are developed, then total output could 
approximate 3.1 million tr oz. It must be remembered, 
however, that this would be a "best case" scenario in terms 
of the price of gold and the results of feasibility studies and 
future developments. 



40 



PRIMARY GOLD MINING IN THE CONTINENTAL 
UNITED STATES 

The 16 major gold producing operations in the continen- 
tal United States as of January 1984 can be classified into 
three basic types: 14 surface (bench-berm), 1 floating plant- 
dredging operation, and 1 underground mine. Separate 
discussions of the three major mining types follow. 



Surface Mining 

Of the 14 producing surface operations evaluated as of 
January 1984, only 2 were in production in 1968 and only 
5 were in production as late as 1979. Thus, two-thirds of 
the major surface mines have been brought on-stream in 
the last 5 yr. Six of these nine new operations, and 8 of the 
14 in total, utilize heap leaching of the ore, rather than con- 
ventional milling. In terms of ore grades, the eight current 
heap leaching operations are treating material grading from 
1 to 5 g/mt with a straight average of 2.5 g/mt, while the 
six operations milling their ore are treating material rang- 
ing from 1.7 to 7.9 g/mt with a straight average of 5.3 g/mt. 
From a long-term availability perspective, only 3 of the 14 
operations will be treating 100 pet millable ore over their 
entire productive lives, since 2 of the 5 that are currently 
milling their ore have at least some portion of their long- 
term resource planned for heap leaching. 

Table 34 presents combined operational data for the 14 
major surface mines. Included are estimates, circa 1982-83, 
of mining labor levels (including prorated administrative 
employment), ore capacity, waste capacity, ore plus waste 
capacity, waste to ore ratios, mine productivity (defined as 
metric tons of ore plus waste per worker-shift), and 
estimated gold output for 1983. Table 34 demonstrates two 
major points concerning the surface mining of gold ores in 
the continental United States as of 1983. First, the 
evaluated mines are highly efficient, with an average pro- 
ductivity measure of 238 mt ore plus waste being mined 
per worker-shift. Second, the weighted-average recoverable 
grade of the ore mined, estimated to be slightly less than 
3 g/mt, is relatively low. Both of these characteristics are 
due to four major technological and economic developments 
since the early to mid-1970's, as follows: 

1. The availability of larger and more efficient earth- 
moving equipment. 

2. The major increase in the price of gold. 

3. The development of and refinements to the heap 
leaching method of gold extraction. 

4. The development of and refinements to the various 
techniques of extracting gold by the use of carbon. 

It is difficult to ascertain general characteristics of the 
surface mining operations analyzed in this study. Stripping 
ratios vary between operations, and even within an opera- 
tion, as do the ore and the waste haulage distances. These 
two items, especially the stripping ratio, depend more upon 
the gold grade of the defined ore reserve and can vary from 
year to year depending upon the price of gold. An opera- 
tion will attempt to adjust to the type of resources that is 
available. 

As analyzed, the stripping ratios for the operations 
range from 1.0/1.0 to 9.8/1.0, the haulage distances for ore 
range from 0.3 to over 12 km, and the transport distances 
for waste range from 0.3 to 1.5 km. Over their estimated 
productive lives, the 14 surface mining operations will mine 
from as many as 35 different pits (deposits). 



Table 34. — Combined operational data for major gold 

producing surface mines in the continental 

United States 

Category Value 

Total estimated employment in mining 1 1,100 

Annual ore capacity 2 10 6 mt. . 14.3 

Annual waste capacity 2 10 6 mt. . 51.2 

Total annual ore plus waste capacity 2 10 6 mt. . 65.5 

Overall waste-ore ratio, weighted average 2 3.6:1.0 

Overall productivity, ore plus waste per worker-shift 3 . . mt . . 238 

Estimated 1983 gold output 10 3 tr oz. . 1,350 

Estimated recoverable gold grade 4 g/mt. . 2.94 

includes prorated administrative labor; circa 1982-83 estimates. 

2 Circa 1982-83. 

includes prorated administrative labor. 

«Circa 1983 ores. 



Table 35. — Comparative operational characteristics of 

continental U.S. surface mines, low and high mining 

cost levels 



Operational characteristics 



Low-cost High-cost 
mines mines 



Number of operations 9 

Ore plus waste moved 10 6 mt/yr . 4.5-14.0 

Overall mining productivity, average per 

shift 1 mt. 

Operations using contract mining: 

Number 

Percent 

Operations employing heap leaching: 

Number 

Percent 

Typical excavation equipment: 

Operations using shovels and front-end loaders: 

Number 

Percent 

Operations using front-end loaders only: 

Number 

Percent 

Shovel size m 3 . . 

Front-end loader size m 3 . . 

Typical transport equipment: 

Average number of trucks per operation 

Truck size mt . . 45 

Operations using crawler tractors with trailers: 

Number 

Percent 



0.30 



290 



1 
11 



3 
33 



7 
78 

2 

22 

3.8-8.0 

4.6-10.0 

12 
-77 



3.8 



30 



5 
-2.5 



170 



3 
60 



5 
100 



1 
20 

4 

80 

4.0 

-5.3 

8 
-45 

1 
20 



'Metric tons of ore plus waste moved per worker-shift; prorated administrative 
labor. 

Mine operating cost estimates, based on 1984 dollars 
per metric ton of ore, range from about $3.50 to $11.56. 
These values reflect the total cost of moving waste and ore, 
which is then burdened solely to the ore tonnage. For com- 
paring operating costs among operations, it is more valid 
to look at the costs on the basis of the total material moved 
(ore plus waste basis). When this is done, the producing sur- 
face gold mines in the continental United States basically 
split into two different classes of operations: (1) low-cost 
operations, which can move a ton of material for $1.06 to 
$1.54, and (2) high-cost operations with corresponding costs 
of $2.23 to $4.15. Table 35 summarizes the important 
characteristics that differ between the two classes. Several 
generalizations regarding these two classes can be made: 

1. Those operations with high costs on a ton of ore plus 
waste moved basis are low-tonnage, 100-pct heap leach 
operations with mostly contract mining (60 pet) using 
smaller front-end loaders (FEL's) 3.8- to 5.3-m 3 capacities 
and trucks (30- to 45-mt capacities). For this study, where 
an operation was contracting out its mining, the estimated 
operating costs had a 20-pct profit factored into the estimate, 
representing contractor profit. 

2. The low-cost operations are high-tonnage operations, 
treating mostly milling ore (66 pet of the operations) with 



Table 36. — Classification of producing surface 

operations by level of mine operating cost and grade 

of demonstrated resource 



Class of operation 



Number of 
operations' 



Overall weighted-average 

grade o) demonstrated 

resource, g/mt 



Low-cost surface mines. 

milling ore 

Low-cost surface mines. 

heap leach ore 
High-cost surface mines. 

heap leach ore 



3.45 
1.18 
221 



'Does not include the 1 dredging operation in California. 1 operation with 
both millable and heap leaching ore is counted twice. 

noncontract mining. They employ a combination of shovel- 
FEL excavation with truck, haulage using large equipment 
(4.6- to 10.0-m s FEL's and 45- to 77-mt trucks). 

3. Contract mining appears to be favored when the 
operation plans to heap-leach the ore and the reserve for 
mining is indicated to be less than 10 yr, or where climatic 
conditions limit the mining season to 9 months of the year 
or less. 

Table 36 summarizes the overall gold grade of the 
demonstrated resources for the surface mining operations. 
As shown, the demonstrated resources have been classified 
into three categories: (1) low-cost surface mines excavating 
"milling" ore. (2) low-cost surface mines moving ore for heap 
leaching, and (3) high-cost surface mines moving ore for 
heap leaching. The weighted-average gold grade for each 
of these three categories represents the overall weighted- 
average grades for the entire demonstrated resource 
evaluated for all of the operations in that category. As ex- 
pected, those operations mining ore for milling in a conven- 
tional mill have the highest overall grade at 3.45 g/mt. Of 
more interest is a comparison of the overall grades at the 
low-cost and high-cost heap leach operations. These grades 
are 1.18 and 2.21 g mt, respectively. This difference of 1.03 
g mt is significant because it represents additional revenues 
of approximately $9.30/mt, assuming a gold recovery of 70 
pet and a gold price of $400/tr oz. 

Table 37 attempts to show how lower mine operating 
costs at high-tonnage surface mines compensate for a lower 
grade of material that has to be leached. As shown, the min- 
ing cost at the low-cost heap leach operations is nearly 54 



41 



pet less on a per-ton-of-material-moved basis, or about 57 
pet less on a per-ton-of-ore basis. This allows material 
grading 67 pet less to be heap-leached at a total production 
cost (mining plus leaching) that is only 30 pet ($29/tr oz 
recoverable gold) higher. 

Underground Mining 

Underground mining in 1983 represented only about 
15 to 20 pet of total U.S. gold production from primary ores. 
As of early 1984, the only significant underground gold 
mine in the continental United States is the Homestake 
Mine in South Dakota, which has been in continuous pro- 
duction for 108 yr. One other significant underground 
primary gold producer closed in late 1983. Two mines are 
currently under development: the Ropes Mine in Michigan 
and the Cannon Mine in Washington. Several other pro- 
spective underground primary gold deposits were in various 
stages of exploration and study as of 1984; however, it is 
felt that for the near term the Homestake Mine should con- 
tinue to dominate gold production from underground 
deposits in the United States. 

Several aspects of the Homestake mining operation are 
of interest. First, as of the early 1980's the lowest level of 
workings was about 2,450 m in vertical depth, or slightly 
over lVz miles deep. Second, the increase in the price of gold 
since the early to mid-1970's has allowed the feed grade to 
be lowered significantly, which in turn has allowed the mine 
to increase its use of high-volume, low-cost mining methods 
such as blasthole open stoping and vertical crater retreat 
(VCR) stoping. For example, in 1981, 43 pet of the mine's 
ore output came from blasthole stoping and VCR stoping, 
and 57 pet came from higher cost, cut-and-fill mining. Third, 
as of the early 1980's, major exploration of the deposit below 
the 2,450-m level was being conducted. These three aspects 
basically define the characteristics and concerns of the mine 
as of the 1980's, which are the increasing depth of mining 
and the need for flexibility in mining methods appropriate 
to changing economic conditions and gold price levels. 

Because of the few operations involved, operating costs 
at underground gold mines in the United States are not 
discussed in detail. In general, the costs are or should be 
similar to the underground mining costs being experienced 
at most of the Canadian mining operations. 



Table 37. — Effect of lower mine operating costs on the ability to mine and process low-grade material at 
selected producing heap leach operations in the Western United States 



Low mine High mine 

operating cost' operating cost 2 

Range Average Range Average 

g cost per metric ton of ore plus 

$141-$1.50 $146 $223 $4 15 $3.21 

Mining cost per metric ton of ore 

$300-$3 52 5 $3.26 $6 48 $9 54 «$7 57 

eached g/mt 1.03- 1.28 1.16 182 5 00 3 52 

Recovery factor pel NAp 70 NAp 70 

Recoverable gold per metric ton of 

ore leached g NAp 81 NAp 2 46 

Ore reoured to produce 1 b 

recovered gokj NAp 5 38 4 NAp «12 6 

Mining cost pe r troy ounce of gold 

NAp '$125 '$96 

NAp Not applicable 

2 100-oct heap leaching operations, costs as of Jan 1984 
a for 3 100-pct he "3 operations; costs as of Jan 1984 include contract mining 

'Determined as follows $1 46/mt ore plus waste multiplied by the average stripping ratio of 2 23 for the 2 properties included 
^Determined as follows $3 21/mt ore plus waste multiplied by the average stripping ratio of 2 35 for the 3 properties included 
>Oetermined as follows 3i 1035 g/tr oz d>v.ded by 81 g/mt = 38 4 mt required to produce 1 tr oz gold 
•Determined as follows 31 1035 g/tr oz divided b/ 2 46 g/mt = 12 6 mt required to produce 1 tr oz gold 
T>elermined as follows 38 4 mt multiplied by $3 26/mt ore K 
•Determined as toftc ■■ 



Difference low-cost 

relative to high-cost 

operations, pet 



54 

57 

67 

NAp 

67 

NAp 

30 



42 



Tabic 38.— Operational characteristic* of producing gold mill* In tho continental United States, by type of milling method, circa 1983 



Number of 
operations 



Annual ore 

capacity, 

10»mt 



Annual gold 
recovery, 
10» tr oz 



Range 



Mill feed grades. 
g/ml gold 

Weighted 



average 



Range 



Recoveries of 
gold, pet 

Weighted 



average 



Heap leaching 

Vat leaching (conventional milling) 

Bulk Moat-leach tails 

Dredging (gravity separation) 

Total 

NAp Not applicable. 



10.165 

7.550 

50 

6,400 



405 

924 

13 

22 



0.95-5 5 

1.63-7.9 

NAp 

NAp 



18 



24,165 



NAp 



17 
48 
86 
.14 



NAp 



60-85 

70-94 

NAp 

NAp 



NAp 



71 3 
860 
920 
600 



NAp 



Placer Mining 

Because of limitations on the minimum size of the gold 
producing operations analyzed in this study, only two ma- 
jor placer operations, one producing and one in study as of 
1984, were evaluated. 

The producing operation began production in 1980. It 
is near Marysville, CA, and required the renovation of a 
dredge that had last operated in 1967. In renovation, the 
maximum excavation depth was increased to allow excava- 
tion from a depth of 42.7 m below the water level of the 
dredging pond. The operation also involves a large amount 
of overburden removal using FEL's and conveyor belts to 
increase the area available for dredging. The operation has 
been so successful that plans as of 1982 were to renovate 
a second dredge to operate in a nearby area. 

The evaluated nonproducing placer operation would 
have an output capacity equivalent to that of a major pro- 
ducer and would be somewhat unique in concept. Initially, 
bulldozers and FEL's will scrape overburden into trap 
loaders feeding conveyor belts for transport to waste or 
reclamation areas. With increased mining depth, an ad- 
vanced overburden removal system will be required to 
remove overburden on the extreme western edge of the 
mine. 

Following the overburden removal stage, low-grade 
fluvials will be mined by bulldozers and processed in skid- 
mounted trommels and concentrating plants. The concen- 
trating plants will be stationed in an interim processing 
water pond. As mining progresses, these concentrating 
plants will be positioned on benches. 

In a third stage of mining, high-grade gravels will be 
excavated with a backhoe, a hydraulic breaker, a ripper 
mounted on a backhoe, and an FEL. When the lowest bench 
is formed it will be approximately 12.2 m above bedrock, 
and subsequent excavations from this bench will be below 
the water table. These excavations will fill with water to 
form a pond capable of floating a barge equipped to process 
the high-grade gravels. These three mining stages will be 
initiated at staggered intervals so that each is in advance 
of the other. 

In the concentrating process, trommels will wash and 
size low-grade gravel to less than 9.525 mm; high-grade 
gravel will be sized to less than 19.05 mm. A desliming tank 
will separate the heavy metals from clay. Screens and 
pulsating jigs will produce a gold concentrate, which will 
flow to the amalgamation circuit. Amalgam (a mixture of 
mercury, gold, and black sand) will be retorted in an air- 
tight metal tank; retorted gold will then be melted in a fur- 
nace and formed into bullion. 

When both these placer operations have attained their 
full capacity, as proposed circa 1982-83, they should account 
for about 100,000 tr oz combined annual production. 
However, based on the demonstrated resource analyzed in 
this study, the operations have mine lives extending only 



to 1992-95. The economics of these large placer operations 
appear to be favorable at the reported grades of the material 
being mined or planned for mining. Weighted-average 
grades range from 0.1 to 0.5 g/mt. Long-run production costs 
are estimated at $300/tr oz to $350/tr oz recovered gold. It 
must be remembered that placer operations this large are 
always high-profile operations in terms of environmental 
aspects. Thus, even though the economics of these opera- 
tions appear favorable, a "boom" of similar developments 
should not be expected. 



GOLD MILLING IN THE CONTINENTAL 
UNITED STATES 

The 16 major gold producing operations in the continen- 
tal United States as of 1983 included 8 operations that were 
using heap leaching to produce gold bullion, 6 that were 
using conventional crush-grind-vat leach methods to recover 
gold, 1 that was using a combination of heap leaching and 
conventional vat leaching, and 1 that was using a dredge 
and gravity methods for gold recovery. An additional opera- 
tion of interest due to its beneficiation technique was one 
that was producing a bulk flotation concentrate product and 
then leaching the tails from flotation to produce dore 
bullion. 

Table 38 summarizes the pertinent estimated opera- 
tional data covering the four basic types of milling opera- 
tions. The Carlin operation in Nevada, which utilizes a com- 
bination of heap leach and conventional milling, is ac- 
counted for in table 38 as one operation in each of two 
categories. The data in the table represent circa 1983 opera- 
tional data and do not necessarily reflect expected or pro- 
posed changes to the capacities and milling methods that 
have been evaluated in this study when addressing the 
economics of these operations over their total productive 
lives. 

The operation that was floating its ore and leaching the 
tailings closed down in late 1983 and has only an estimated 
3-yr reserve remaining. This operation was not included in 
the cost analyses but is briefly discussed from a comparative 
technical perspective. The two predominant methods in use, 
heap leaching and conventional vat leaching, are discussed 
in detail. 

Heap Leaching (Solution Mining) 

Heap leaching of gold ores is a recent development in 
the U.S. gold mining industry. A correct term for this 
method would be "solution mining" of prepared ore dumps 
with cyanide solutions. 

The method was developed to economically treat low- 
grade gold ores (primarily less than 3 g/mt) through much 
lower capital requirements and lower operating costs per 
ton of ore treated in the milling stage. It is a particularly 



43 



good method when treating disseminated oxide ores of the 
type discovered in the 1960's and 1970's in the Western 
United States. 

In most cases, the material to be leached is first 
delivered to a crusher. The crushed ore is then delivered 
by truck to specially prepared leach pads. A cyanide solu- 
tion of appropriate strength and pH is then evenly 
distributed on the heap through sprinklers and allowed to 
percolate through. The gold particles dissolve in the cyanide 
solution, which is collected in sumps and pumped to the gold 
recovery plant. The gold is extracted from the solution by 
one of two methods, the carbon-in-pulp (CIP) method or the 
Merrill-Crowe deaeration-zinc dust precipitation method. 
In the first case, the gold in solution is adsorbed onto 
granules of carbon which are then stripped of the "loaded" 
gold by a hot NaOH solution. This solution is in turn fed 
to electrowinning cells where the gold deposits onto 
cathodes of steel wool. In the second method, the product 
is a zinc -dust precipitate, which is filtered. The cathodes 
(in CIP) or the precipitate (in Merrill-Crowe) are then melted 
in crucible furnaces along with fluxing materials such as 
borax, niter, and silica. The resultant product from the 
smelting is a dore bullion of precious metals grading 
anywhere from 35 pet gold and 55 pet silver to 96 pet gold 
and 3 pet silver. In practice, there are many variations to 
the "normal" description of heap leaching given above, and 
subsequent discussion will attempt to describe some of the 
variations being practiced as of 1983 in the United States. 

The economics of a heap leaching operation are very 
dependent upon the gold recovery that is obtainable. 
Because the ore grades are so low (less than 1 g/mt leached 
in some cases) it is difficult to exercise effective grade con- 
trol. Thus, heap leaching operations can experience grade 
variations from month to month or year to year of as much 
as 25 to 50 pet, and the operations have to have a built-in 
flexibility to be able to increase tonnage and reduce 
operating costs through economies of scale. 

Location is also important for two reasons. First, one 
of the major advantages to the heap leaching method is the 
low capital cost required for the gold recovery operation. 
Thus, if the proposed mine is in a remote location with at- 
tendant high cost requirements for infrastructural in- 
vestments, this capital cost advantage could be negated. Se- 
cond, heap leaching works best in dry or arid and temperate 
to hot climates. Cold temperatures negatively affect nor- 
mal heap leaching operations because the solubility of gold 
decreases greatly below 50° F and because the leaching 
solution could freeze. Wet climates, especially those prone 
to intense rain storms, pose a problem in that sudden deluge 
would rapidly dilute the leaching solution and could cause 
the collection ponds to overflow. 

As to the mineralogy of the ore itself, one principle is 
of paramount importance: The best recovery of gold will be 
obtained where the most contact can be made by the 
leaching solution on the majority of those gold particles 
amenable to dissolution. In this regard, high clay contents 
in the ore are undesirable because clay causes uneven per- 
colation of the leaching solution. High amounts of sulfide 
minerals in the ore are also undesirable because of preferen- 
tial leaching of base metals such as copper, lead, and zinc 
and because some of the gold particles will be "locked-up" 
in sulfide minerals. Carbonaceous ores fores containing a 
high amount of organic carbon; are difficult because the car- 
bon particles in the ore preferentially absorb the gold before 
it can be recovered in the leach solution. Oxidized ores are 
favorable for heap leaching because the solubility of gold 
is improved by higher oxygen contents during the solution 



stage. In addition, oxide ores usually contain more gold par- 
ticles in the "native" form, and base metals are not pres- 
ent in large amounts. Another favorable type of heap 
leaching ore is material where the gold mineralization is 
disseminated throughout the ore rather than clustered in 
specific zones because percolation will contact more of the 
gold particles. All of these mineralogic factors have a ma- 
jor effect on the overall recovery of gold in the heap leaching 
process. 

As shown in table 38, nine major producing heap 
leaching operations were analyzed for this study. Five of 
the operations are located in Nevada; New Mexico, Col- 
orado, Montana, and Idaho each have one major heap 
leaching operation included in the analysis. One of these 
operations, a small producer in Colorado, is an anomaly in 
attempting to categorize it as either a heap leach or a vat 
leach milling operation. This operation incorporates aspects 
of both methods in that its ore is placed into large vats 
enclosed in a building because of climatic conditions and 
then is subjected to an intense cyanide leach. Another of 
the nine heap leaching operations is also anomalous in com- 
parison with the others in that this operation simply places 
run-of-mine ore (no crushing and no agglomeration) on the 
leach pad, builds berms around the top of the pad, and 
develops a pond of cyanide leach solution on top of the ore 
heap rather than using sprinklers. This operation also does 
not remove the leached ore from the pad at the end of the 
leaching cycle, choosing instead to construct a new pad for 
subsequent leaching. 

It is estimated that the nine heap leach operations ac- 
counted for 405,000 tr oz of gold production in 1983, which 
represents nearly 30 pet of total primary gold production 
from the 16 major producers evaluated in this study. This 
1983 production level is an eight-fold increase over the 
reported 1979 production from solution mining of gold ores, 
which was slightly more than 50,000 oz of gold. This eight- 
fold increase is easily explained when it is noted that seven 
of the nine operations have come on-line since late 1979. 

The ore grades ranged from 0.95 to about 5.5 g/mt, with 
a straight average grade of 2.3 g/mt and a weighted-average 
grade of 1.7 g/mt of leached material. Estimated recoveries 
of gold at the nine heap leaching operations range from 60 
to 85 pet with a straight average of 75 pet and a weighted- 
average recovery of 71 pet. The range of recoveries from 
60 to 85 pet defines fairly well the two extremes to be ex- 
pected in the heap leaching of predominately oxide ores. 

It is difficult to summarize the nine major heap leaching 
operations in production in the United States during 1983. 
At least one major operational characteristic varies among 
the nine operations. The most common methods, along with 
the number of operations utilizing them, are listed in table 
39. 

Somewhat surprisingly, as of 1983, only four of the nine 
operations were agglomerating their crushed ore prior to 
placement into heaps. Agglomeration of the ore with water 
and binders, such as cement, "balls" the ore into particles 
of similar shape and size, allowing a more even distribu- 

Table 30.— Number of U.S. heap leach operations utilizing 
various mining and processing methods 



Crushing of ore prior to leaching 

Agglomeration prior to placement into heaps 

Distribution of solution with sprinklers 

Extraction of gold using the carbon-in-pulp method 

pH control with lime 

Distribution of ore and building of heaps with trucks 

and bulldozer 
Rehandlmg of leached material 
Asphalt base 'or leach pads 



44 



tion of the percolating solution within the entire heap. It 
is especially recommended where the ore contains a fair 
amount of clay minerals or fines material since, in both 
cases, segregation due to placement will cause impervious 
layers to develop within the heap and the cyanide solution 
will be diverted along these impervious boundaries. 

Not surprisingly, six of the operations were using the 
carbon-in-pulp method of extracting the gold from solution. 
The three operations that were using the conventional 
Merrill-Crowe system of extraction were all producing dore 
bullions which contained more silver than gold and have 
appreciable silver contents in the ore, in which case car- 
bon methods are not preferred. 

The majority of the operations control the pH level of 
the cyanide solution with lime rather than caustic soda 
(NaOH), and must distribute and build their heaps with 
trucks and bulldozers. The two anomalies regarding heap 
building are an operation that uses a traveling gantry for 
distribution onto the heap and an operation that does its 
heap leaching in large vats in an enclosed building where 
a front-end loader distributes the ore. 

The most variable production aspects among the nine 
operations occur in four areas: (1) the leach cycle time, (2) 
the number and sizes of the leaching pads, (3) the configura- 
tions of the ore heaps, and (4) the number of months in a 
year that leaching is conducted. Leach cycles (including 
leaching and the removal and treatment of leached 
material) range from 4 days to 3 yr; the majority are in the 
1- to 3-month range. The storage capacity of permanent 
leach pads ranged from 20,000 to 1.0 million mt of ore. The 
configurations of heaps range from "pyramidal" to 
"furrowed." In terms of the leaching season, six of the nine 
operations were limited to 7 to 9 months of the year, while 
three were conducting their leaching virtually year round. 
Of these three year-round operations, only two could do this 
because of natural climatic conditions; the third operation 
was heating its leach solution to allow full leaching for 9 
months of the year and part-time leaching for the other 3 
months. However, heating the cyanide solution causes ap- 
preciable loss of cyanide. 

The estimated operating costs for the heap leaching 
stage at the nine operations range from $2.39/mt to 
$10.52/mt ore. These costs represent the costs incurred from 
the point of ore delivery to the crusher or to the heaps, 
depending upon the particular situation, and include the 
costs of rehandling the leached material at the end of the 
leaching cycle, which in some cases is done by the mining 
contractor. The two highest estimated operating costs of 
$8.75 and $10.52 reflect one operation with higher than nor- 
mal labor costs and one operation with extremely high 
cyanide consumptions. Thus, the more normal range of heap 
leach operating costs, on a per ton of ore basis, is $2.39 to 
$7.37, a range that encompasses seven operations. This nor- 
mal range, in turn, appears to split into two separate 
classes: a low-cost class in the range of $2.39/mt to $4.05/mt, 
and a high-cost class in the range of $4.86/mt to $7.37/mt. 
A comparison of various characteristics for these two classes 
is shown in table 40. The items listed are felt to be the ma- 
jor determinants of whether a particular heap leaching 
operation will be in the low-cost or high-cost class. 

As shown, labor productivities average nearly 48 pet 
higher at the low-cost operations, which is mostly a reflec- 
tion of the larger pad sizes. The low-cost leaching opera- 
tions also show an advantage in the high proportion that 
do not have to crush and/or agglomerate their ore and that 
can operate year- round. 



Table 40. — Labor productivity and operational 

characteristics for low-cost and high-cost heap leaching 

operations in the continental United States 

Low-cost High-cost 

heap leaching heap leaching 

Number of operations 3 4 

Annual ore capacity: 

Range 10 3 mt/yr. . 344-3,265 475-780 

Average 1 3 mt/yr . . 2,290 550 

Pad capacities I0 3 mt.. 250-1,000 20-136 

Labor productivity 1 per worker-shift, mt: 

Range 80-92 42-68 

Average 87 59 

Percentage of operations using— 

Crushing 33 100 

Agglomeration 75 

Waste removal 67 100 

Year-round operation 67 25 

'Includes prorated administration labor 

In the normal range of operating cost levels for heap 
leaching, the costs for direct and indirect labor constitute 
the largest single item, ranging from about 30 to 38 pet of 
the total for the low-cost class and 28 to 38 pet for the high- 
cost class, with both classes averaging about 33 pet. The 
miscellaneous cost category, including maintenance 
materials, insurance, miscellaneous supplies, and water, 
represents the second largest portion of the total operating 
cost, with the low-cost operations averaging 31 pet and the 
high-cost operations averaging 33 pet. Reagent costs are the 
third most important cost category, averaging about 18 pet 
at the low-cost operations and about 21 pet at the high-cost 
operations. Electricity costs and energy costs (gasoline, 
heating oil, and propane) constitute the smallest portion of 
total operating costs in both classes at 18 pet on average 
for the low-cost class and 13 pet on average for the high- 
cost class. 

The following items deal with some generalizations con- 
cerning the costs of specific operations that are intended 
to give the reader a rough idea of the cost levels associated 
with these tasks. First, for operations of smaller capacity 
and in the high-cost class, crushing costs appear to range 
from about $1.25/mt to $2.20/mt ore. Rehandling of waste 
range from about $0.35/mt to $1.72/mt ore. Second, one gold 
operation reported a cost for constructing an asphalt-based 
leach pad of slightly more than $15 per square meter in 
1982. Third, in all cases, cyanide costs represent the first 
or second largest item in the costs for reagents, while costs 
for cement, lime, soda ash, carbon, and nitric acid vary 
among the top three individual reagent costs from opera- 
tion to operation. 

To summarize, heap leaching is a relatively new method 
of recovering gold and could be considered as still in the 
development stage because the operational characteristics 
make it an ideal method of experimentation. With low 
capital and operating costs, heap leaching has enabled gold 
ore of very low grade to become competitive with much 
higher grade gold deposits. The method, however, requires 
high efficiency in the mining and milling operations, along 
with a high degree of built-in flexibility to the operation. 
Also, at present gold prices, the method is limited to cer- 
tain types of ores and is subject to infrastructural and 
climatic constraints. In addition, the gold grades of the 
material leached and recoveries experienced can be ex- 
tremely variable, and much attention should be paid to in- 
itial metallurgical tests of the ore before proceeding with 
a heap leaching operation. A recent Bureau publication (24) 
discusses heap leaching technology, lists 118 leaching opera- 
tions, gives details on 26 key operations, covers Federal and 



45 



Table 41. — Comparative economics of producing heap leach and conventional milling operations in the 

continental United States 



Entirely surface 


Entirely surface 


mining and 


mining and 


heap leaching 


conventional milling 


operations 


operations 



Number of operations 

Total capital investment remaining 1 



Capital cost per troy ounce: 

Range 

Weighted average 
Total (mining plus processing) 
operating cost per troy ounce: 

Range 

Weighted average 

Total operating plus capital cost 
per troy ounce: 

Range 

Weighted average 
Break-even (0-pct DCFROR) 

Range 

Weighted average 
10-pcl DCFROR: 

Range 

Weighted average 
Producing years from January 1984 



8 

7 operations less 

than $20 million; 
5 operations less 

than $10 million. 



$26 to $126 
$47 



$117 to $401 
$288 



$152 to $527 
$335 

$173 to $538 
$349 



$180 to $567 

$360 

4 operations. 3 to 6 yr; 
3 operations. 7 to 10 yr: 
1 operation, 51 yr. 



3 operations greater 
than $60 million: 

4 operations greater 

than $40 million. 

$21 to $82 
$46. 



$146 to $332. 
$247 



$182 to $397. 
$214. 

$187 to $428. 
$268 

$210 to $489. 

$304. 

1 operation. 6 yr; 

4 operations. 12 to 15 yr 



'Unrecovered capital investment in mine and mill plant and equipment, 
through life of operation 



infrastructure, and development remaining as of Jan 1984 plus reinvestments 



State requirements, and provides an extensive bibliography 
of over 160 references on gold and silver heap leaching. 
In terms of annual output, the nine heap leaching opera- 
tions evaluated in this study range from 6,500 to 83,000 
tr oz of gold production, with an average annual output of 
45,000 tr oz per operation. This compares with annual gold 
outputs ranging from 74,000 to nearly 200,000 tr oz/yr at 
the seven evaluated conventional vat mills with an average 
output of 132,000 tr oz/yr. In addition, the mine lives of the 
heap leaching operations tend to be somewhat less than 
those of conventional milling operations. Thus, probably at 
least three average heap leaching operations have to be 
developed in order to replace the annual gold production 
capacity at one average conventional milling operation in 
the United States. 

Comparative Economics of Heap Leaching 
and Conventional Milling 

The economics of heap leaching differ from those of con- 
ventional milling in four significant ways: 

1. Total initial capital investments in plant and equip- 
ment, infrastructure, and development required to bring 
the operation into production are lower. 

2. Total capital reinvestments over the mine life are 
lower. 

3. The preproduction period required to bring the opera- 
tion into production is shorter. 

4. The payback period, due to significantly lower capital 
investments, is shorter. 

Table 41 presents comparative data on eight producing 
surface operations employing 100 pet heap leaching and five 
producing surface operations employing 100 pet conven- 
tional milling. The most significant economic difference bet- 
ween the two is in required total capital investments over 
the mine life (the sum of items 1 and 2 above). Seven of the 
eight evaluated heap leach operations have total estimated 
capital investments, remaining as of January 1984, oi 
than $20 million, and five of the eight have total capita] 



investments of less than $10 million. By contrast, four of 
the five conventional milling operations have total required 
capital investments exceeding $40 million, and three opera- 
tions have total capital investments exceeding $60 million. 
The barrier to market entry, therefore, into gold produc- 
tion from heap leaching of surface material is much lower 
than for conventional milling operations. The relatively low 
total capital costs required for the development and opera- 
tion of heap leaching deposits thus render them viable in- 
vestment opportunities for small mining companies with 
low capitalization. This is the primary reason for the in- 
crease in the number of heap leaching operations that have 
come into production since 1979. 

Conventional milling operations are generally larger 
in terms of annual output, require greater investments in 
facilities such as mill plant and equipment, and require 
higher capital reinvestments over the mine life. But since 
the grade of the ore is higher, total ore resources greater, 
and recoveries better, these conventional milling operations 
have essentially the same capital costs per ounce of 
recoverable gold. Total operating costs per ounce of 
recoverable gold (mining plus milling or leaching cost) 
significantly favor conventional milling, on a weighted- 
average basis. This is not only because of higher grade ore 
and higher milling recoveries but also because of higher 
annual production levels. 

Break-even, long-term total production costs per ounce 
of recovered gold for the eight evaluated heap leach opera- 
tions range from $173 to $538, with a weighted average of 
$349. Seven of the eight operations fall in a range from $173 
to $425. The increase in gold prices in recent years and the 
development of the heap leaching process have served to 
broaden the market in terms of the sources of gold produc- 
tion in the Western United States. On average, the five con 
ventional milling operations have lower total production 
costs than the heap leaching operations, thus demonnt.r;jt tag 
economies from larger scale production and higher grade 
ore as an offsetting factor to hi^hf-r total capital 
investments. 



46 



As analyzed in this study, the heap leach operations, 
on average, have shorter mine lives than the conventional 
milling operations. Seven of the eight heap leaching opera- 
tions have estimated remaining lives of less than 11 yr, and 
four operations have remaining lives of only 3 to 6 yr. By 
contrast, four of the five operations employing conventional 
milling have remaining productive lives of between 12 and 
15 yr. 

Vat Leaching Of Gold Ores 

During 1983, eight of the major primary gold produc- 
ing operations analyzed in this study were using conven- 
tional milling techniques (vat leaching) to treat at least 
some of their ore production. Conventional milling, or vat 
leaching, as defined for this study, is any mill that crushes 
and grinds its ore and performs cyanide leaching in agita- 
tion vats. Seven of the eight mills produce precious metal 
(dore) bullion by crushing, grinding, leaching, and gold ex- 
traction with various methods plus smelting. The remain- 
ing mill was producing a bulk flotation concentrate contain- 
ing most of the gold and silver and then leaching the tail- 
ings from flotation to produce a small amount of dore 
bullion; this operation has since closed down. In terms of 
geographic location, four of the eight mills are located in 
Nevada with one mill each located in Utah, Montana, South 
Dakota, and Washington. The oldest of the mills was con- 
structed in 1937, another basically dates from 1952-53 
when a major renovation was made, one dates from the 
mid-1960's, and one was originally constructed as a copper 
mill in the late 1960's and then converted to a primary gold 
mill in 1978-79. The remaining four mills are all relatively 
new, two being commissioned in 1981 and two brought in- 
to production in 1983. 



Table 42. — Comparative characteristics of major vat 

leaching mills in the continental United States, circa 

1983 



Mills less than Mills more than Total or 
5 yr old 1 yr old average 



Number of mills 5 

Combined annual ore 

capacity 10 3 mt. 5.17 

Combined annual gold 

production capacity 

10 3 tr oz. 518 

Weighted-average feed grade 

g/mt. 3.7 

Weighted-average mill 

recovery pet. 84 



2 


7 


2.38 


7.55 


419 


937 


6.1 


4.4 


93 


87 



If the copper mill that was converted to primary gold 
milling is included as a "new" mill, then the five mills 
brought on-line in 1979-83 represent sufficient capacity as 
of late 1983 to treat slightly more than 5.2 million mt/yr 
ore to produce nearly 520,000 tr oz/yr gold. The three older 
mills, as of late 1983, had the capacity to treat about 2.4 
million mt/yr ore to produce nearly 420,000 tr oz gold. Com- 
bined, the eight major mills were probably producing about 
940,000 tr oz gold in 1983, or more than two-thirds of total 
U.S. primary gold production. 

Since the mill in Washington State that was producing 
a bulk flotation concentrate and dore bullion was shut down 
late in 1983 and has a limited (2- to 3-yr) reserve of ore, 
the following discussion will concentrate on the seven ma- 
jor vat leaching mills currently in operation. 

Table 42 summarizes the operational characteristics of 
the two groups of conventional gold mills: those less than 
5 yr old and those more than 10 yr old. The five newer mills 
have productive capacities ranging from 445,000 to 1.7 
million mt/yr ore to produce between 73,000 and 196,000 
tr oz/yr gold. The two older mills range from 700,000 to 1.7 
million mt/yr ore milling capacity to produce from 128,000 
to 279,000 tr oz/yr gold. 

Of particular interest in table 42 are the lower feed 
grades and lower recoveries at the newer mills compared 
to the older mills. The lower feed grades at the five newer 
mills reflect the increase in the price of gold since the 
mid-1970's, which enabled lower grade deposits to be 
brought into production. Even though the two older mills 
were treating ore in 1983 that graded 50 pet higher than 
the newer mills' ore, they have also lowered their feed 
grades in response to the gold price increase. For example, 
in 1974 these two mills produced about 530,000 tr oz gold 
from 2.2 million mt ore, whereas in 1983 the two mills pro- 
duced about 420,000 tr oz gold from 2.4 million mt ore, a 
decrease of 29 pet in the weighted-average feed grade and 
a 21-pct decrease in overall gold production. Yet, using 
average gold prices of $160/tr oz for 1974 and $425/tr oz for 
1983, the indicated 1983 revenue from these two mills' pro- 
duction is 214 pet higher than 1974's estimated revenue. 
Even if the estimated revenues for 1974 and 1983 are com- 
pared on a constant-dollar basis, the estimated revenue for 
1983 is still 15 pet higher than 1974's estimated revenue 
despite a 20- to 30-pct decrease in feed grades and 
production. 

As in Canada and Australia, it is difficult to categorize 
the major vat leaching gold mills in the continental United 
States because the ores all have slightly different 
characteristics. Table 43 shows the variations in practices 



Table 43. — Variations of major circuit practices at vat leaching gold mills in the continental United States, early 

1980's 



Major circuit 

Ore blending 

Comminution 

Coarse free gold recovery . 

Special treatments 

Extraction of gold from 
cyanide solution 

Carbon reactivation 

Special byproducts 



Method or practice 

Carbonaceous with noncarbonaceous ores 

Single-stage crushing; grind with SAG mill and ball mill 

2- or 3-stage crushing; grind with rod and/or ball mill 

Launder traps in grinding circuit 

Jigs and tables with grinding circuit 

Separation into major sand and slimes fractions 

Oxidation of pyrrhotite with air 

Oxidation of carbonaceous ore with chlorine gas 

Carbon-in-leach (CIL) with electrowinning onto steel wool 

Carbon-in-pulp (CIP) with electrowinning onto steel wool 

Carbon-in-pulp (CIP) with zinc dust precipitation 

Merrill-Crowe deaeration-clarification with zinc dust precipitation 

In gas-fired kilns 

In kilns or with nitric acid wash 

Mercury production by retorting steel wool or filter cake 



Number of mills using 
method or practice 



47 



at the seven major vat leaching gold mills as of the early 
1980's. The categorizations shown point out six major 
aspects of interest. 

First, only two of the seven mills include some provi- 
sion for recovery of coarse, free gold in their circuits. One 
mill recovers slightly more than 20 pet of its total 
recoverable gold with the use of launder gold traps in its 
grinding circuit, while the other mill recovers from 10 to 
20 pet of its gold by using jigs and tables to treat the cyclone 
underflow from the ball milling circuit. In total, only about 
7 pet of the annual gold recovered at the seven milling 
operations represents coarse, free gold recoverable by 
gravity methods. 

Second, carbon methods for extracting gold from the 
cyanide leach solution are used in six of the eight separate 
extraction circuits involved. The two extraction circuits that 
use the older Merrill-Crowe deaeration-clarification method 
are mills that are more than 10 yr old; these mills have ob- 
viously found no reason to change the original extraction 
method at their older circuits. However, 100 pet of the ex- 
traction circuits constructed at major vat leaching mills in 
the continental United States within the last 10 to 11 yr 
have been carbon method circuits. 

Third, all six circuits using carbon methods for extract- 
ing gold from cyanide solution reactivate the stripped car- 
bon particles in gas-fired or indirectly fired kilns. At one 
operation, the stripped carbon is sometimes reactivated by 
using a nitric acid wash. 

Fourth, mercury is produced at three of the seven mill- 
ing operations. The mercury is present in the steel wool 
cathodes from electrowinning or in the filter cake from zinc 
dust precipitation. At those operations producing mercury 
for sale, the cathodes or filter cake are smelted and the 
vaporized mercury is condensed to liquid form for sale in 
flasks. The residue from this first smelt is then resmelted 
in the presence of fluxes such as niter, borax, and silica to 
produce the final dore bullion product containing the 
precious metals. The amount of mercury produced is not 
large, and revenues from mercury are miniscule compared 
to those from gold and silver.* The three operations that 
produce mercury as a byproduct are the same three that 
treat carbonaceous ore as a portion of the total ore feed. 

Fifth, one of the seven vat leaching operations makes 
a major split of its ground ore into a sand fraction (about 
60 pet of the total tonnage treated) and a slimes fraction 
(about 40 pet of the total tonnage treated). The sand frac- 
tion is leached in vats with gold extraction by the Merrill- 
Crowe-zinc dust precipitation method, while the slimes frac- 
tion is pumped 4.8 km to a vat leaching plant which uses 
carbon-in-pulp absorption, stripping with a hot caustic solu- 
tion, and electrowinning of the gold onto steel wool. 

Sixth, and possibly of most interest, is that three of the 
seven operations must contend with carbonaceous feed of 
a refractory nature. Material referred to as "refractory" is 
not rigorously defined; basically it is any material with a 
high organic carbon content in proximity to the gold par- 
ticles and/or a fair amount of the gold "locked up" in pyrite 
that results in very low gold recoveries when treating the 
ore with normal cyanide leaching techniques. To obtain 
reasonable (over 70 to 80 pet; gold recoveries with this type 
of ore, it is necessary that the ore be oxidized prior to the 
cyanide leach. 



•Only two of the three operation* have reported their level of mercury pro- 
duction. The values given approximated 50 and 250 flajkn of I 
year 



Of the six major points discussed above, it is appropriate 
that two of these major points should be expanded upon in 
separate discussions. These two items, the predominant use 
of carbon extraction methods and the handling and treat- 
ment of carbonaceous (refractory) gold ores, are the two most 
important developments in the vat leaching of gold ores in 
the United States since the late 1960's. Interestingly, both 
of these developments were heavily dependent upon joint 
research efforts of major U.S. gold mining companies and 
Bureau of Mines metallurgical research facilities. 



Extraction of Gold With Activated Carbon 

The first major attempts to utilize the ability of ac- 
tivated charcoal or carbon to absorb complex metal ions in 
the processing of gold ores occurred in the 1940's and 1950's. 
The Golden Cycle mill in Cripple Creek, CO, the Getchell 
mine near Golconda, NV, and the Idria Mine in the coun- 
try of Honduras are cited as three of the earliest plants to 
utilize the carbon-in-pulp process. These earlier plants were 
recovering the gold-loaded carbon from the slurry by screen- 
ing or flotation and then recovering the gold from the car- 
bon by burning the carbon or sending the gold-loaded car- 
bon to a smelter. Unfortunately, the fixed gold price of the 
1950's and 1960's caused these three operations to close, 
and the CIP process was temporarily forgotten (25, p. 95). 

Three developments in the late 1960's and early 1970's 
caused a resurgence of interest in the CIP method. First, 
the price of gold was allowed to find its own level, raising 
the possibility of higher prices in the future. Second, the 
Bureau of Mines Research Center at Reno, NV, developed 
a hydrometallurgical method to strip the gold from the car- 
bon particles using a hot, caustic-cyanide washing solution 
under elevated pressures. The resulting solution contain- 
ing the stripped gold was then sent to a specially developed 
electrolytic cell (the Zadra cell) for electrowinning the gold 
onto cathodes of steel wool. Third, the largest gold producer 
in the United States, the Homestake operation in South 
Dakota, was attempting to find a solution to increased labor 
costs at its slimes leaching plant, where the requirement 
to filter-press 1,800 mt/d of slimes was becoming burden- 
some (25, p. 95). 

As a result, Homestake Mining Co. and the Bureau of 
Mines Reno Research Center conducted a joint pilot plant 
operation at Lead, SD, in 1971. The results were favorable, 
and a full-scale 2,177-mt/d CIP plant was constructed in 
1972-73. This plant was the first major CIP plant con- 
structed in the United States to use the new caustic solu- 
tion washing-electrowinning procedures. A second CIP plant 
was constructed by Homestake Mining Co. at Creede, CO, 
in 1975-76, and a third major plant came on-stream in 1979. 
This plant was at Duval Corp.'s Battle Mountain operation, 
where a copper flotation mill was converted to a CIP gold 
ore processing plant. In 1980-83, four other major vat 
leaching plants using carbon methods to extract the gold 
came on-stream. 

As practiced currently in the CIP method, carefully sized 
particles of activated carbon are contacted with the pulp 
(leached ore plus cyanide solution) from the vat leaching 
stage. This contact takes place in stages in a series of tanks. 
The barren activated carbon is introduced to the last tank 
in the series and is advanced countercurrently to the pulp 
flow. Thus, the most "unused" carbon is contacted with the 
pulp that should have the least amount of gold availablf 
for absorption onto the activated carbon. 



48 



The gold-loaded carbon particles, suspended in a slurry, 
are then screened from the slurry and washed in a hot 
caustic-cyanide solution, usually under elevated pressures, 
to extract the gold from the carbon particles. The gold in 
the wash solution can be recovered either by electrowin- 
ning onto steel wool cathodes or by precipitation with zinc 
dust. The stripped carbon can be reused in the process after 
reactivation. This is usually accomplished by heating the 
spent carbon in a kiln, but washing the spent carbon with 
nitric acid will also reactivate it. 

The above is a generalized description of the CIP 
method. Needless to say, there are technical variations in 
each plant in operation. 

A second, more recent, carbon method is called the 
carbon-in-leach (CIL) method. In this method, the carbon 
particles are contacted with the pulp in the vat leaching 
stage itself, rather than after the leaching stage. This 
method is usually employed when the ore to be fed to the 
leaching stage contains a fair amount of organic carbon; 
the idea is to mitigate the deleterious effects on gold 
recovery caused by organic carbon in the ore. This is ac- 
complished by introducing the activated carbon into the 
leaching stage where the deleterious effects occur. 

As shown in table 43, of the six "gold extraction with 
carbon" circuits at major vat leaching mills in the continen- 
tal United States, five use the CIP method and one uses 
the CIL method. Also, five of the six circuits use electrowin- 
ning onto steel wool cathodes, while one circuit uses zinc 
dust precipitation of the gold in the caustic-cyanide solu- 
tion. Also, as noted previously, all six of the circuits reac- 
tivate the stripped carbon by heating it in kilns, with one 
of the circuits sometimes using a nitric acid wash. 

The advantages and disadvantages of carbon methods 
of extraction versus the conventional Merrill-Crowe 
deaeration-clarification and zinc dust precipitation method 
of extraction are still being debated and involve many 
technical questions beyond the scope of this analysis. 
Original claims were that both capital costs for equipment 
in the carbon extraction circuits and operating costs are 
lower, mostly owing to lower labor requirements for the ex- 
traction circuit. In cases where all of the other factors con- 
tributing to overall capital costs and overall operating costs 
are equal, these claims will be true. The predominance of 
the use of carbon methods in the United States appears to 
be due to three major factors: 

1. Labor requirements and maintenance and/or replace- 
ment costs are lower with carbon methods. This is in keep- 
ing with the stress placed on efficiency at all of the newer 
U.S. gold milling operations. 

2. New mill circuits (constructed within the last 10 yr) 
are predominant in the United States. 

3. The technology of carbon methods is probably most 
advanced in the United States. 



Carbonaceous Gold Ores 

Carbonaceous ores, those containing a high amount of 
organic carbon, are fairly common in the Southwestern 
United States. Because the organic carbon particles in this 
type of ore will adsorb gold that is present in the cyanide 
solution ("preg robbing"), recoveries of gold are very poor 
without some type of treatment to destroy as much of the 
organic carbon as possible before the cyanide leaching stage. 
There are no hard-and-fast rules as to the effect that the 
organic carbon content in a particular ore will have on the 



overall gold recovery without special treatment. 8 However, 
the general relationship is probably close to the experiences 
of the Carlin operation in Nevada, which was recovering 
only slightly more than 34 pet of the gold when milling its 
carbonaceous ore without special treatment versus as much 
as 83 pet of the gold when using an oxidation with chlorine 
gas treatment on the same type of ore (26, pp. 103-104). 

Three of the seven vat leaching mills analyzed in this 
study have had to contend with carbonaceous ores. Two of 
the three operations have developed the preoxidation- 
chlorinoxidation method (also referred to as the "double- 
oxidation" method) of treating carbonaceous ores. The third 
operation, which is much lower grade than the other two, 
decided that oxidation of its carbonaceous ore was too cost- 
ly and chose instead to blend the carbonaceous ore with its 
regular noncarbonaceous ore in a ratio of about 1:9, thereby 
attempting to control the effect of the carbonaceous ore on 
lower gold recovery. As a result of this decision this opera- 
tion has the lowest overall gold recovery of the seven mills 
analyzed, with 70 pet being considered as good as can be 
expected with that particular blend of the two ore types. 

The chloric oxidation method of treating carbonaceous 
ores was initially investigated beginning in 1967 with a 
joint research program between the Carlin Gold Mining Co. 
and the U.S. Bureau of Mines Metallurgical Research 
Center at Reno, NV. After extensive bench-scale testing, 
a pilot plant was constructed in 1969 to test the use of either 
chlorine or sodium hypochlorite as the oxidizing agent (26). 
The chlorine gas method was selected because generating 
sodium hypochlorite by electrolysis of the pulp involved 
high capital costs which were not justified by the size of the 
carbonaceous reserve involved. The chlorine oxidation cir- 
cuit began treating ore on a fairly large scale at Carlin in 
1971-72. In 1977, a preoxidation with air stage was added 
prior to the chlorine oxidation stage to oxidize some of the 
pyrite and pyrrhotite prior to the main oxidation stage. The 
second U.S. mill to utilize chlorine oxidation was con- 
structed during 1979-81 and basically uses the same 
methodology as at Carlin. 

At one of the two operations that treat carbonaceous ore 
by oxidation, 20 pet of the total annual ore milling capaci- 
ty represents carbonaceous ore; at the other mill, fully 50 
pet of the total annual ore capacity is for carbonaceous ore. 
Recoveries being experienced in the 1980's ranged from 83 
to 87 pet of the gold in the carbonaceous ore at the two opera- 
tions using the preoxidation-chlorine oxidation method. 

A brief description of the process follows. First, when 
treating carbonaceous ore, the two basic types of ore, car- 
bonaceous and noncarbonaceous, are handled separately in 
the crushing and grinding stage. The ground carbonaceous 
ore is slurried, and the pulp is heated using steam to 100 ° 
F at one operation and to 180 "Fat the other. The heated 
pulp is then sent to agitation tanks, where air is mixed with 
the slurry to oxidize as much of the pyrite, pyrrhotite, and 
other sulfide minerals as possible prior to the chlorine ox- 
idation stage. The preoxidized pulp is then sent to another 
series of agitation tanks, where chlorine gas and air are 
introduced to oxidize the remaining sulfides and the organic 
carbon particles. 

The method is expensive. For example, this study 
estimates that the "double-oxidation" method using 

"Work by the U.S. Bureau of Mines and the U.S. Geological Survey as of 
the early 1970's had classified ores containing 0.25 to 0.8 pet organic car- 
bon as carbonaceous ore and those containing 0.06 to 0.25 pet organic car- 
bon as noncarbonaceous. However, as noted by Guay and Peterson (26, p. 
103) the organic carbon assay was never found to be a highly useful tool 
in the metallurgical development work at the Carlin, NV, mill. 



49 



chlorine adds from $5.30 mt to $6.50/mt ore milled to the 
normal operating costs expected for straightforward 
cyanidation vat leaching, with the additional costs repre- 
senting mostly chlorine consumption (13.6 to 22.7 kg-mt of 
ore milled) and steam generation for heating. Thus, it is 
not surprising that the two operations using the double- 
oxidation method with chlorine gas also are the two highest 
grade operations of the se%-en vat leaching mills studied, 
with average feed grades of about 6.5 g mt to nearly 8.0 
g mt. A rough measure of the effect that this additional 
operating cost can have is that with a carbonaceous ore 
grading 6 g mt, the added operating cost of $6 mt ore would 
represent an additional cost of $37/tr oz recovered gold, 
assuming an 85-pct recovery of gold with the process. 

As summarized in table 42, the total combined annual 
ore capacity for the two vat leaching operations constructed 
prior to 1974 is 2.38 million mt yr ore to produce 420,000 
tr ozyr gold. Individual feed rates as of the early 1980's 
for the two operations were 700,000 and 1.7 million mt/yr 
with feed grades of 5.5 and 6.3 g mt, respectively, or 6.1 g/mt 
on a weighted-average basis. Total mill recoveries averaged 
90 and 94 pet, respectively (93 pet on a weighted-average 
basis). In comparison, the total combined ore capacity for 
the five newer mills constructed since 1978 is 5.17 million 
mf yr ore to produce about 518,000 tr oz/yr gold. Individual 
ore capacities at these newer mills range from 445,000 to 
1.7 million mtyr and average 1.04 million mfyr. Individual 
outputs of gold at the newer mills range from 74,000 to 
196,000 tr ozyr gold for an average output of 104,000 tr 
oz/yr gold. Feed grades at the newer mills range from 1.6 
to 7.9 g mt with a weighted-average feed grade of only 3.7 
g mt. nearly 35 pet lower than the comparable value for the 
two older mills. Similarly, overall gold recoveries at the 
newer mills range from 70 to 90 pet with a weighted average 
of 84 pet. nearly 9 pet lower than the comparable value for 
the two older mills. The lower weighted-average gold 
recoveries at the newer mills reflect two factors. First, 
overall recover,' of gold decreases as lower grade ores are 
processed, especially ores below 2.5 g/mt. Second, one of the 
five newer mills is processing a certain amount of unoxi- 
dized carbonaceous ore. 

All seven of the vat leaching operations produce dore 
bullion as the final product. The dore bullions range in 
grade from 47 to 96 pet gold and have gold-silver ratios rang- 
ing from about 1:1 to as high as 48:1. 

The estimated mill operating costs at the seven vat 
leaching operations range from $9.44/mt to $21.82/mt ore 
feed. This cost range includes appropriate weightings for 
those operations treating certain percentages of noncar- 
bonaceous and carbonaceous ores. The estimated cost range 
for vat leaching of noncarbonaceous (normal) ores ranges 
from $9.44 mt to $17.76/mt ore feed. The requirement to 
utilize double oxidation with chlorine gas to treat car- 
bonaceous ores is estimated to add $5.30/mt to $6.50/mt to 
the normal vat leaching operating cost, reflecting additional 
costs for chlorine and steam generation. 

Indicated levels of productivity, including adminis- 
trative labor at the older mills, range from 15 to 20 mt ore 
milled per worker-shift with an average of 17.5 mt. Produc- 
tivity at the newer mills is more than double ranging from 
26 to 75 mt ore milled per worker-shift, and averaging 37 
mt. 

Despite the reasonably high efficiencies at the vat 
leaching operations treating gold ores, the cost of direct and 
indirect labor, as a percentage, represents the single most 
important component of the overall mill operating cost, 



ranging from about 27 pet to over 50 pet with an average 
of 34 pet for all seven milling operations. At the newer mills, 
the second largest cost item, as estimated in this study, is 
the miscellaneous costs (all costs except direct and indirect 
labor cost, reagent costs, and energy costs), which have a 
wide range as a percentage of the total cost, generally from 
16 to 46 pet with an average of 33.5 pet for the five newer 
mills. At the older mills, the miscellaneous cost items repre- 
sent the third most important cost element, averaging 17.5 
pet of the total cost. The estimated costs for reagents, ex- 
pressed as a percentage of the total milling cost, are fairly 
consistent with a range from 15 to 26 pet of the total cost 
and an average of 22 pet for all seven operations. The costs 
for electrical energy and energy in the form of steam, pro- 
pane, and fuel oil constitute the smallest individual major 
cost component at the vat leaching operations. As a percen- 
tage of the total operating cost, energy costs range from 5 
to 27 pet with an average of 15 pet. 

Refining and Transportation 

It is estimated that as of 1981, total gold refining capaci- 
ty in the continental United States was about 6.0 million 
tr oz/yr. This total represents capacity for refining dore 
bullion, anode slimes from copper electrowinning, copper- 
lead-zinc concentrates, and scrap and other residues. In 
1981, copper-lead-zinc concentrates, anode slimes from cop- 
per refining, and other residues were being processed at 
eight facilities with a total production capacity of about 2.0 
million tr oz/yr refined gold. Scrap and residue were being 
refined at 22 small facilities having a total production 
capacity in 1981 of about 800,000 tr oz/yr. Only three 
facilities— Englehard Minerals' refinery at Newark, NJ, 
Handy and Harman's refinery at Attleboro, MA, and 
Homestake Mining's refinery at Lead, SD— were accepting 
the main product of primary gold mining operations (dore 
bullion) along with scrap and residue. The three refineries 
accepting dore had a combined estimated production capaci- 
ty of slightly more than 3.6 million tr oz/yr refined gold, 
with most of the capacity being at Engelhard's refinery. In 
1981, the primary producers of gold in the Western United 
States were probably shipping about 900,000 to 1.0 million 
tr oz/yr dore bullion by air to these Eastern U.S. refineries. 

Since 1981, two important developments have occurred 
in the geographical location of the refineries accepting dore 
bullion. First, Johnson Matthey Investments, Inc. of Lon- 
don, England, began construction of a major precious metals 
refinery in a suburb of Salt Lake City, UT. The $10 million 
facility was planned to have an initial production capacity 
of 1.5 million tr oz/yr refined gold and 5.0 million tr oz/yr 
refined silver with the design enabling the doubling of pro- 
duction capacity with minor changes. The refinery was 
dedicated on April 22, 1983. The second development oc- 
curred 1 yr later on April 5, 1984, when Englehard Minerals 
announced that it would close its refinery in Newark, NJ 
(27). The relationship between these two developments is 
not entirely clear, although the shift makes geographic 
sense with the increase of primary gold production in the 
Western United States. 

The initial production capacity of 1.5 million tr oz/yr 
refined gold at the new Johnson-Mathey refinery is more 
than sufficient to handle the output from the primary gold 
operations evaluated in this study. For example, if the out- 
put of gold from the Homestake, SD, operation and the gold 
production from the small operation that closed in late 1983 






50 



are not considered, the 15 remaining major surface gold pro- 
ducers would account for about 1.05 million tr oz gold pro- 
duction in 1983. Thus, with the capability of easily doubl- 
ing production at the Salt Lake City refinery, there will 
be sufficient refinery capacity to easily handle an additional 



1.0 million tr oz annual primary gold production, should 
such a development occur between now and 1990. However, 
a large gold price increase could result in a large increase 
in recycled scrap material, which could swamp the refin- 
eries, as happened in 1980. 



CANADA 



HISTORICAL PERSPECTIVE 



It is estimated that approximately 215 million tr oz gold 
were produced in Canada during the period 1858 through 
1983. Canada has been the second-ranked market economy 
producer (behind South Africa) and the third-ranked world 
producer (behind South Africa and the Soviet Union) since 
overtaking the United States in 1930. Provided that the gold 
price remains about $400/tr oz, Canada should maintain 
this ranking into the 21st century, although some projec- 
tions assert that Brazil may take over the third-ranked posi- 
tion by 1990. 

Table 44 summarizes the major historical production 
developments of the Canadian gold mining industry. Ex- 
cept during 1974-81, Canada has produced over 2 million 
tr oz/yr gold since 1930. Fully 88 pet of total gold produc- 
tion from Canada has occurred since 1930. Major, sus- 
tainable levels of gold production were only attained with 
the development of the lode gold deposits in Ontario dur- 
ing 1909-25. 

Figure 23 summarizes the Provincial distribution of gold 
production for selected years through 1983. As shown, gold 
production in the early years of this century was dominated 
by placer operations in British Columbia and Yukon Ter- 
ritory, whereas production from Quebec, Ontario, and the 
Northwest Territories was negligible. By 1933, these short- 
lived placer operations were replaced in importance by pro- 
duction from underground operations in Ontario and 
Quebec, which accounted for 85 pet of total production. Gold 
production since the 1960's has been dominated by Quebec, 
Ontario, the Northwest Territories, and British Columbia, 
which collectively accounted for 93 pet of total production 
in 1983. 



RECENT PERSPECTIVE: 1968-83 

Figure 24 depicts total mine production of gold in 
Canada for 1968-83, a period when the average annual gold 
price increased tenfold from $40/tr oz to $425/tr oz. The 
period just prior to 1968 had recorded a 34-pct production 
decrease from 4.629 million tr oz in 1960 to 3.062 million 
tr oz in 1967 (20). This decline is directly attributable to 
steadily increasing costs of production in the face of a fixed 
gold price. By 1970-71, when the United States lifted the 
gold backing for the dollar, production had further declin- 
ed to slightly above 2.0 million tr oz/yr (20), the lowest level 
of production since 1930. The freeing of the gold price in 
1970-71 did not halt the decline in Canadian production, 
which fell into a narrow range of 1.628 to 1.735 million tr 
oz/yr for a 9-yr period between 1973 and 1981 (20). Because 
the majority of Canadian gold production was from vein- 
type lode deposits during this period, it is most likely that 
the additional 20-pct decrease from the 1970-71 period to 
the 1973-81 period was caused more by a lowering of the 
mill feed grade at the surviving operations than by the ac- 
tual closure of gold operations. 



A major turnaround in gold production has occurred 
since 1981, with production in 1983 being 36 pet higher than 
in 1981. However, putting this increase into perspective, 
the 1983 level of production at 2.27 million tr oz (20) is 
basically the same as 1970 production and still about 
400,000 tr oz less than production in 1968. It is estimated 
that the currently developing mines of the Hemlo District 
will add around 676,000 tr oz of annual output by 1989. Yet 
even with this addition, the projected output for 1989 will 
only be at levels prevalent in the 1960's and still far below 
the historical highs. 

Table 44. — Historical summary of the Canadian gold 
mining industry 

Year or 

Period Occurrence or development 

1823 Placer gold discovered on the Chaudiere River in 

Quebec Province. 
1846 Silver veins reported in the vicinity of Thunder Bay, 

Lake Superior Region. 
1852 Free gold discovered in quartz at Mitchell Harbour, 

Queen Charlotte Island. Causes the first auriferous 

quartz "rush" in British Columbia. 
1857-65 Formal introduction of Canadian decimal currency 

occurs in 1858. First official annual gold production 

values are released for 1858, which totals 34,104 tr 

oz, all from British Columbia. Many placer gold 

discoveries occur in several Provinces during 

1858-66. 
1866 First discovery of gold in Canadian Precambrian 

shield near Madoc, Ontario. 

1869 Gold discovered in the Yukon River. 

1894-1900. . . . Annual gold production increases substantially from 

54,600 tr oz in 1894 to 1.3 million tr oz in 1900. Of 

the increase, 1 .2 million tr oz (96 pet) comes from 

British Columbia and the Yukon Territory as a result 

of the discovery of placer gold at Klondike, Yukon 

Territory, in 1896. 
1906 Annual gold production reaches a low of 406,000 tr oz 

as a result of a drastic decline in production from 

the Yukon placers. 
1909 Dome, Mclntyre-Porcupine, and Hollinger Claims are 

staked in the Porcupine District of Ontario. 
1911-17 Teck-Hughes, Wright-Hargreaves, and Lake Shore 

Claims are staked in the Kirkland Lake District of 

Ontario. 
1 922 Annual production reaches 1 .2 million tr oz, passing 

the 1.0-million-tr-oz mark for the first time since 

1902. Ontario accounts for 1.0 million tr oz, or 83 

pet, of the total. 
1925 First discovery of lode gold in the Red Lake District 

of Ontario. 
1930 Canada's annual production of gold surpasses U.S. 

production for the first time and passes the 2.0- 

million-tr-oz/yr level for the first time. 
1935 Annual production passes the 3.0-million-tr-oz/yr level 

for the first time; Ontario accounts for 2/3 of the 

total. 
1936 First cyanide mill in Canada is constructed in Nova 

Scotia. 
1937-41 Annual production reaches 4.1 million tr oz in 1937 

and soars to 5.3 million tr oz in 1941. 
1942-45 Gold production drops 53 pet from the 1941 level 

to about 2.5 million tr oz in 1945. 
1951-62 Annual gold production ranges from 4.1 million tr oz/yr 

to 4.6 million tr oz/yr, demonstrating fairly good 

stability. 
1963-67 In 1963, Canadian gold production falls below the 

4.0-million-tr-oz/yr level for the first time since 1937. 
1968-83 Annual production continues to show a decline from 

2.7 million tr/oz in 1968 to a low of 1.6 million tr/oz 

in 1980. First results from drilling in the Hemlo 

District, Ontario, announced in 1981. Annual 

production rebounds from 1980 low to 2.3 million tr 
oz in 1983. 

Sources: References 20 and 28. 



51 



Attannc ?-w¥>ces 

3=>CT 




P-one =>-tv -cm 



1973, 1.93 . : 6 ~ 



1983, 2.27« iC b *-oz 



Figure 23. — Provincial distribution of Canadian gold pro- 
duction in selected years (pet and 1 0* tr oz). 




IVI 1972 I'J/J I9M \'jlt l'J/6 19^7 19/8 19/9 I'JBO 1901 1982 I'jM 



Figure 24. — Total mine production of gold In Canada, 

-igea-aa. 



52 




1980- f.627x I0 6 Ttoz 



1983- 2.280 t 10 s troz 



Figure 26. — Mine production of gold In Canada by typo 
of dopostt for soloctod year*. 



PRODUCTION BY DEPOSIT TYPE 

Figure 25 presents Canadian gold mine production for 
selected years broken down by deposit type (29, p. 57; 30, 
p. 62). As shown, 82 pet of total mine production in 1965 
was accounted for by "auriferous quartz" or lode-type 
deposits. Base metal mines, producing gold as a byproduct 
of copper, lead, or zinc production, accounted for 17 pet, and 
placer deposits represented the remaining 1 pet. By 1980, 
production from lode-type deposits had declined by almost 
2.0 million tr oz and represented only 60 pet of total pro- 
duction. Production from base metal mines had also fallen 
but by only approximately 50,000 tr oz and represented 34 
pet of total production. Production from placer deposits had 
risen by around 50,000 tr oz and represented 6 pet of total 
production in 1980. By 1983, production from lode-type 
deposits had increased by 730,000 tr oz and accounted for 
75 pet of total production. Byproduct gold production from 
base metal mines had fallen by 1.0 million tr oz, while placer 
production had increased slightly. 

A comparison of total Canadian production with produc- 
tion from lode-type deposits demonstrates that the level of 
total production is extremely dependent upon the output 
from lode-type deposits. For example, 94 pet of the 
1.3-million-tr-oz decline in total production from 1965 to 
1980 was due to declines in output from the lode-type 
deposits. Likewise, the 647,000-tr-oz increase in total pro- 
duction from 1980 to 1983 was due to increased output from 
lode-type deposits, which increased production enough to 
both offset the declines in output from base metal mines 
and add to overall annual production. The following sec- 



Table 45. — Gold production from Canadian lode-type 
deposits, 1973 and 1981, by Province 



Province 




Number of 
operations 

1973 1981 


Percent of total 
lode production 

1973 1981 


Ontario 
Quebec 
Northwest ' 
British Colu 


"erritories . . . 
mbia 


12 
6 
4 



11 

10 

6 

3 


59.5 

23.0 

17.5 

.0 


46.0 

37.5 

13.5 

3.0 


Total 


22 


30 


100.0 


100.0 


Sources: 


References 31 


and 32. 









tions detail the geographical distribution of the three 
deposit types and discuss the number of mines producing 
from each deposit type by region. 

Lode-Type Deposits 

Table 45 summarizes the provincial and operational 
aspects of lode deposit production of gold for 1973 and 1981, 
which are believed to exemplify the changes that have 
taken place in the Canadian gold mining industry. In 1973 
there were 22 primary lode gold mines (owned or operated 
by 17 companies) producing 1.4 million tr oz/yr gold. By 
1981, there were 30 primary lode gold mines (owned or 
operated by 25 companies) producing 1.1 million tr oz/yr. 
In both years, over 80 pet of lode gold production originated 
in Ontario and Quebec. 

Three of the mines producing in 1973 had closed by 
1981, while 11 new mines had come on-stream— 6 in Quebec, 
2 in the Northwest Territories, and 3 in British Columbia. 



53 



Table 46. — Byproduct gold production from Canadian base metal operations, 1973 and 1981, by Province or 

Territory, number and type of operation 



1973 



1981 



Province or 
territory 



Gold 

production, 

pet 



Number and 

type of 

operation 



Gold 

production 

pet 



Number and 

type of 

operation 



British Columbia 

Quebec 
Ontario 

Manitoba and Saskatchewan 

Yukon Territory 

Newfoundland 

New Brunswick 

Total operations 
Total production 10 3 tr oz 

NAp Not applicable 

Sources References 31 ana 32 



35 

29 
15 

14 
3 
3 

1 

100 
528 



1 Fe-Cu, 
1 Ag. 

1 Pb-Zn-Cu. 
10 Cu 

6 Pb-Zn-Cu. 
6Cu. 

3 Pb-Zn-Cu. 

2 Ni-Cu, 
2 Cu. 

4 Pb-Zn-Cu, 
1 Cu. 

1 Pb-Zn, 

1 Cu 

1 Pb-Zn-Cu. 

1 Cu 

1 Pb-Zn-Cu 

42 NAp 
NAp NAp 



48.0 

22.5 

7.0 

13.0 

6.0 

2.0 

1.5 

100 
462 



1 Ag, 
1 Fe-Cu, 

1 Ag-Cu, 

2 Pb-Zn-Cu, 
9Cu. 

4 Pb-Zn-Cu, 
4 Cu. 

1 Pb-Zn-Cu, 

2 Ni-Cu. 

4 Pb-Zn-Cu, 
1 Cu. 
1 Pb-Zn, 
1 Cu. 

1 Pb-Zn-Cu. 
1 Cu. 
J Pb-Zn-Cu 

35 NAp 

NAp NAp 



Production from the lode deposits, however, had fallen for 
two basic reasons. First, 9 of the 11 new operations only 
accounted for approximately 84,000 tr oz of total annual 
production by 1961. or an average of less than 10,000 tr oz/yr 
per operation. Second, the high gold prices of 1980-81 caus- 
ed the larger operating lode mines to decrease their mill 
feed grade for these years. 

Production began turning around in late 1981. In the 
period from November 1981 through the first quarter of 
1982, nine new lode gold mines came into production with 
capacities ranging from 10,000 to 70,000 tr oz/yr; the ma- 
jority were in the 20,000- to 50,000-tr-oz/yr range. These 
new operations accounted for at least 300,000 tr oz of addi- 
tional lode gold production in 1982 and, combined with the 
raising of mill feed grades at the larger operations due to 
lower gold prices, led to an increase of slightly more than 
400,000 tr oz in total lode gold deposit production from 1981 
to 1982. An additional 150,000 tr oz of lode production added 
between 1982 and 1963 came mostly from the final phases 
of expansion plans at producers instituted in 1981-82, since 
the net gain in the number of producers during this time 
was only two. During 1983 5 mines opened and 3 closed, 
leaving a net of 41 primary lode producers as of early 1984 
(32). 



Base Metal Deposits 

Byproduct gold production from primary base metal 
mines has fallen steadily from 602,000 tr oz in 1965 to 
455,000 tr oz in 1983. Table 46 gives a breakdown of gold 
production from base metal deposits by Province and type 
for 1973 and 1981. As shown, the decrease of approximate- 
ly 66,000 tr oz from 1973 to 1981 coincided with a decrease 
in the total number of operations in production from 42 to 
35; 13 mines closed '5 Pb-Zn-Cu, 6 Cu, 1 Ag, and 1 Cu-Fej 
while 6 mines were opened <2 Pb-Zn-Cu, 1 Cu, 1 Fe-Cu, 1 
Ag, and 1 Cu-Agj. The majority of the decrease occurred 
in Quebec and Ontario; two Pb-Zn-Cu and two Cu mines 
closed in each Province with no new operations put into 
production. 



In 1981, approximately 73 pet of byproduct gold produc- 
tion from base metal mines was produced by only 12 of the 
36 operations. These 12 all produced in excess of 15,000 tr 
oz/yr and were comprised of 3 Pb-Zn-Cu, 1 Ni-Cu, 1 Cu-Ag, 
and 7 Cu operations. As of early 1984, 11 of the 12 opera- 
tions were still producing. Two major points concerning the 
economics of byproduct gold production from base metal 
mines can be made: 

1. The economic viability of byproduct gold producers 
depends upon the primary and coproduct base metals be- 
ing produced rather than the economics of gold. 

2. Control of gold grades and recoveries is very limited. 
Assuming that prices for copper, lead, zinc, and nickel 

reached their lowest levels during 1982-83, then byproduct 
gold production in Canada may have bottomed out at about 
the 450,000-tr-oz level. Combining this with the assump- 
tion that the 12 major producers represent a "core" of pro- 
duction during the worst of economic conditions, then an- 
nual byproduct production would have a low-level range of 
about 350,000 to 450,000 tr oz and a high-level range of 
450,000 to 550,000 tr oz. 

Placer Deposits 

In the early to mid-1960's placer gold production in 
Canada was fairly steady at a level of 40,000 to 50,000 tr 
oz/yr, representing around 1 pet of total output. In 1967, 
a sharp drop occurred and placer production fell to below 
10,000 tr oz/yr, remaining there until 1975. Since 1975, 
placer production has steadily increased. Production in 1983 
totaled approximately 114,000 tr oz and represented 5 pet 
of total Canadian production. In 1973, when placer produc- 
tion for the year was only 9,804 tr oz, one sluicing opera- 
tion in British Columbia and 32 sluicing operations in the 
Yukon Territory provided the bulk of production. The opera- 
tions in the Yukon Territory accounted for 66 pet of the out 
put, the one operation in British Columbia accounted for 
32 pet, and a number of very small operations in Alberta, 
Manitoba, and Saskatchewan accounted for the remaining 
2 pet (31 ). By 1981, nearly all the creeks in British Colum- 
bia and the Yukon Territory with a history of gold produc- 



54 



Table 47. — Demonstrated resource data for selected major Canadian primary gold operations as of January 1984 



NM Not meaningful. 

'Mill feed basis, includes adjustments for mining recovery and dilution. 

2 As of early 1984, includes 1 property in the financing stage. 



Classification 


Number 

of 

operations 


Recoverable 1 

resource, 

10 6 mt 


Contained gold 1 
10Mroz Pet 


Recoverable gold 
10Mroz Pet 


Major producing 

Major developing 2 


14 
4 


111 
132 


22.0 
20.0 


NM 
NM 


20.6 NM 
18.9 NM 


Total 

Underground ore 

Surface ore 


18 

17 

5 


243 
NM 

NM 


42.0 

37.9 

4.1 


NM 

90 

10 


39.5 NM 

36.1 91 

3.4 9 



tion had been staked. Because of the recent boom in placer 
production, it is difficult to estimate the average size of the 
more important operations. Indicated production capacities 
of the larger operations are only about 2,000 to 3,000 tr 
oz/yr. The major points to be made concerning placer pro- 
duction in Canada are— 

1. Because of hoarding and other nonreporting, it is dif- 
ficult to estimate placer production. 

2. The majority of placer production comes from two 
districts in British Columbia (Atlin and Cassiar) and three 
districts in the Yukon Territory (Dawson City, Mayo, and 
Kluane Lake). 

3. With gold prices above $400/tr oz, a steady annual 
placer production of 50,000 to 150,000 tr oz can probably 
be expected. 

4. Many of the placer operations in Canada are rework- 
ing deposits for the third or fourth time, and many are on- 
ly economical when treating a large volume of feed material. 

RESOURCE OVERVIEW, 1984 

Estimates of reserves and resources in Canada have in- 
creased greatly since the late 1970's. The Canadian Govern- 
ment estimate of 1984 reserves was more than three times 
higher than the 1978 estimate and 35 pet greater than the 
1983 estimate. These 1983 and 1984 estimates of 27 and 
36 million tr oz, respectively, are conservative and repre- 
sent a minimum level of availability. The estimates are 
based upon information that is circa 1982-83 and by defini- 
tion cover only "operating mines and deposits committed 
for production as of January 1 of each year" (33). The 
estimates probably cover mostly material that is considered 
to be economically minable by the companies submitting 
the information. It is believed that the estimates include 
both primary and byproduct sources of gold. 

This study (table 47) analyzed a demonstrated gold 
resource, as of January 1984 (mill feed basis), of 22.0 million 
tr oz, contained within the 14 largest and most significant 
primary producing mines. These operations, with one ex- 
ception, each contain in excess of 450,000 tr oz gold in the 
demonstrated resource. In addition, a 1984 demonstrated 
gold resource contained within three developing primary 
gold mines in the Hemlo District of Ontario and one poten- 
tial large-scale surface mine is currently estimated at 20.0 
million tr oz. Total Canadian primary demonstrated gold 
resources contained in the 18 major operations and deposits 
included in this study are thus estimated at 42.0 million 
tr oz. Based on the analysis, this contained gold is appor- 
tioned 90 pet to underground resources and 10 pet to sur- 
face minable resources. On a recoverable gold basis, the ap- 
portionment is basically the same, 91 pet underground and 
9 pet surface, with the slight change due to different overall 
recoveries. Only 1 evaluated operation (a nonproducer) 



would be a 100-pct surface mine, whereas 14 operations 
would be 100-pct underground producers and 3 operations 
would produce from both surface and underground 
resources. The surface resource present at three 
underground producers is insignificant in total quantity, 
and it is expected that these operations will exhaust their 
surface material in a few years. This resource situation 
stands in sharp contrast to that in the United States, where 
a large majority of the resource is surface minable material. 

The potential amount of demonstrated byproduct gold 
contained within 31 producing and nonproducing copper, 
lead zinc, and silver deposits totals approximately 15 million 
tr oz. However, a potential of only about 6 million tr oz is 
contained within currently producing operations, some of 
which are under severe economic pressure and are ques- 
tionable future producers. This reduces the probable 
availability of this byproduct gold. In addition, byproduct 
gold grades are generally less than 1 g/mt, recoveries are 
less than for primary operations, the time frame of 
availability is considerably longer, and the relative share 
of byproduct to total production has fallen from 34 pet in 
1980 to 20 pet in 1983 as base metal production has de- 
clined. The very poor performance of base metal prices has 
impacted severely upon a determination of economic 
reserves of gold associated with base metal production, as 
in the case of the aforementioned Canadian Government 
estimates. Taking this fact into consideration, together with 
the more recent information supporting this study's higher 
estimate of Hemlo gold resources, places these two sets of 
estimates in close relation to each other. 

An independent estimate by Homestake Mining (23) 
based upon 1983-84 data places primary gold reserves in 
Canada at 51 million tr oz of contained gold. This estimate 
includes current producers, the major Hemlo developments, 
and a large number of smaller producers and potential pro- 
ducers. Reserve and resource estimated for Canada's large 
number of smaller producers and explored deposits (poten- 
tial producers) are very difficult to quantify with any degree 
of accuracy. This 51-million-tr-oz estimate is considered to 
be a reliastic inference of the upper range of known poten- 
tial primary gold resources in Canada. 

Estimates of total contained gold resources in Canada 
thus range, circa 1983-84, from a minimum of 36 million 
tr oz of "total reserves" (official Canadian estimate for 
operations in production or committed for production as of 
January 1, 1984) through this study's estimates of 42 
million tr oz of demonstrated primary gold resources, or 48 
million tr oz of total demonstrated resources for both 
primary and byproduct operations, to potentially as high 
as 51 million tr oz of primary gold resources estimated by 
Homestake Mining. All three sets of estimates vary between 
15 and 30 pet of each other, and differences are due mostly 
to definitions concerning the number and sizes of operations 
included in the estimate. 



55 



9 
9 
9 

• 

O 

o 




LEGEND 
CotiM, producing gold m.n#, 
Cosftd, protp*cf'»« gold m.nts 
Nonccsttd, o»otp«ct'vt gold mines 
C.t, 

UOfO' hiftofpcol lod, gold m.ning comps (districts) 
A-sai o* gold d*potiti and occurrences 
wit- : : ii::i. ii 

Areas of gold deposits Ond occurrence* 
Precomoron ctpotures 



Figure 26. — Location of producing and prospective 
primary gold mining operations, areas of gold deposits, 
and historical lode gold mining districts In Canada. 




LEGEND 
ft Costed, producing gold mmes 
ft Noncoeted, producing goldmines 
X Costed , proepecttve gold mints 
Kt Ncercoeted, prospective gold msnes 



Hemlo OperoTKms 

( LOC teinenMs Prop* t, 

GoktanGoit, 

TtCfc-CoronO Property) 



BjssmtK 
Uocosso-, 
(WlllrorUj 



Agmco-Eogle 

(Gc*d Division) 
Aquorrt/s 

/ ,t*ju«ouet Codilkx 

loJAaiorrncI 
K^o'iw vmi 




' p^ra., Iwiirrr^^^^Ty^^omrio-eeararr 

^^TVf *V •fx*^' ' 

Stock ^* 7 \ KeA \ \ ^Sigmo 
To^isnio _ / \ Add.soV \ N Kieno 



\ ^KienO 
Xromr-AOgotd 



Figure 27. — Location of producing and prospective 
primary gold mining operations In Quebec, Ontario, and 
Manitoba. 



Table 47 presents a summary of this study's 42 million 
tr oz of demonstrated resource for the 18 cost-evaluated pro- 
ducing and developing primary gold mines that contain the 
majority of total available gold. Figures 26 and 27 show the 
location of the evaluated operations. 

In terms of annual ouitput, the 14 currently producing 
major operations accounted for over 58 pet C1.328 million 



tr oz) of total 1983 Canadian gold production and for 78 pet 
of gold production attributable to "auriferous quartz" (lode- 
type) deposits. These operations constitute the basic core 
of the Canadian gold mining industry. Because some opera- 
tions involve 2 or more separate mines, these 14 major 
operations represent 22 of the 41 operating lode gold mines 
in Canada as of 1983. The remaining 19 lode gold mines 



56 



not evaluated in this study accounted for about 375,000 to 
400,000 tr oz of Canada's 1983 production. Only 7 of these 
19 nonevaluated mines have annual production levels ex- 
ceeding 25,000 tr oz. Indications are that the 12 smaller 
producers had only 4 to 5 yr of reserves at the start of pro- 
duction. Performing an accurate and detailed cost analysis 
for these small, probably short-lived, mines is very difficult 
and relatively unimportant by comparison to the world-class 
operations that were evaluated. 

The three evaluated developing mines in the Hemlo 
District will represent the next significant increase in Cana- 
dian gold production between 1984 and 1990 and should 
account for an additional 676,000 tr oz of average annual 
output by 1989. 

It cannot be overemphasized that gold is the dominant 
mineral in recent years in terms of Canadian exploration 
and new mine development. During the last 5 yr many 
small mines and three world-class operations have come into 
production. Many more deposits are under continued ex- 
ploration and development planning with an eye toward 
eventual production. The three developing world-class 
operations at Hemlo that were evaluated could represent 
the beginning of a potentially large increase in Canadian 
gold production. Primary gold resources in Canada are ex- 
pected to continue to expand for at least the near-term. 
Byproduct gold resources, and especially reserves, are a 
much more questionable issue, given the near-term outlook 
for base metal prices. The gold industry is in a very dynamic 
phase, not just in Canada but worldwide. All reserve and 
resource estimates will be subject to the same degree of 
dynamism and change. 



PRODUCTION COST AND AVAILABILITY: 
CURRENT PRODUCERS 

The 14 largest producing and the 4 most significant 
developing or potential mining operations were evaluated 
to determine long-run total production cost and gold 
availability as of January 1984. The summary results of 
these analyses are given in tables 48 through 51 and figures 
28 through 33. The economic analyses are present in two 
sections. The first section constrasts the 11 largest 
underground producers with more than 10 yr of pre- 1984 
production with 3 new underground producers with less 
than 5 yr of pre- 1984 production and 1 proposed large-scale 
surface mine. This section addresses the economics of new 
gold operations relative to those of older continuous pro- 
ducers. The second section focuses on the three developing 
mines of the Hemlo District in Ontario and underscores the 
very significant impact upon overall Canadian gold 
availability and annual production potential that the ex- 
ploitation of the Hemlo District is expected to have in the 
near future. 

Comparative Economics of 
Underground Production 

In general, average ore grades for the producing opera- 
tions are high, and their remaining producing lives, as 
determined by current demonstrated resource estimates, are 
usually 10 yr or greater. An estimated 23.482 million tr 
oz of refined gold is recoverable in total from the 15 non- 
Hemlo operations as of January 1984. Of this total, approx- 
imately 2.9 million tr oz is available from the proposed sur- 
face mine. Average annual available production totals ap- 



proximately 1.5 million tr oz, of which 0.23 million tr oz 
is available from the proposed surface operation. Total re- 
quired capital investments that must be recovered over the 
remaining life of each opeation range from $9.5 to $538 
million for a total of approximately $1.8 billion in order to 
fully exploit their current 1984 demonstrated gold 
resources. 

The relative contribution of per-ounce capital and 
operating costs to total cost is depicted in figure 28. Capital 
costs per ounce of recovered gold range from $22 to $136. 
Operating costs per ounce of recovered gold range from $112 
to $526. Total operating plus capital costs per ounce range 
from $134 to $598. At the break-even level, long-run total 
cost estimate range from $138/tr oz to $614/tr oz, and at 
a 10-pct rate of return (fig. 28), cost estimates range from 
$168/tr oz to $647/tr oz. 

The future availability of gold is heavily dependent upon 
new mine development as resources in older mines are ex- 
hausted. In Canada, three new world class underground 
mines have begun producing during the last 5 yr. Table 48 
presents summary data on the cost determination analyses 
for these 3 new underground producers with less than 5 yr 
of pre-1984 production and contrasts it to similar data 
developed for 11 underground producers with at least 10 
yr of pre-1984 production. This table details the relation- 
ship between the major total-cost-determining factors of mill 
feed grade (a measure of resource quality), available annual 
production (a measure of output quantity or resource flow), 
total recoverable gold (a measure of total product quantity 
or resource stock), the number of past and future produc- 
ing years as of January 1984 (the time element), total 
capital investment to be recovered, and capital and 
operating costs per ounce of gold. 

The most important distinction between new and old 
underground operations is in mill feed grade, which reflects 
the higher gold price levels of the late 1970's and early 
1980's. The newer operations average 5.4 g/mt over their 
total demonstrated resource, compared with 11.4 g/mt for 
older producers. The three new mines account for 319,000 
tr oz/yr combined output, or between 11 and 15 pet of ex- 
pected Canadian production during 1983-86. Capital in- 
vestments, as $102/tr oz recovered gold, are 62 pet higher 
than for the older producers, while operating costs, at 
$328/tr oz are 27 pet higher than for the older producers. 
As a result, berak-even total costs at the new producers 
average $100/tr oz recovered gold more than for the older 
producers. 

The three new underground mines with less than 5 yr 
of past production will require prices well above the $400 
base price in order to recover all costs over the lives of the 
operations and obtain a 10-pct long-run rate of return. These 
operations began producing in 1979 or later and were the 
results of exploration and development activity of the 
mid-1970's, which was initiated owing to the rapid escala- 
tion in gold price that began at that time. The long-run price 
outlook during the time that the production decisions for 
these mines were made was much more bullish than cur- 
rent gold prices would support. Two of the three new 
underground producers have average grades of 4 g/mt or 
less. This is the major negative element for this group of 
mines, given the relatively unfavorable 1983-84 gold prices. 

At the new producer evaluated as a long-term 
predominantly underground operation that is currently 
mining surface material, this material represents 12 pet of 
the total demonstrated resource at this operation and is ex- 
pected to be mined out by 1988, at which time production 
must commence underground. Although current economics 



57 



Table 48. — Comparative summary results of 1984 long-run cost determination analyses for underground Cana- 
dian mines 





5 yr or less 

past production 

(3 mines) 


Greater than 10 yr 

past production 

(11 mines) 


Range 






wei 


Total or 
ghted average 


Range 




Total or 
weighted average 


3 4-11.0 

50-144 

504-3.322 

8-23 








5.4 

319 

4.823 

NAp 


2.7-21.2 

37-216 

111-4.810 

3-40 






11.4 

936 

15.757 

NAp 


S47-S307 

S93-S136 

S248-S352 








$490 
$102 
$328 


$9.5-$538 

$22-$112 
$112-$526 






$992 

$63 

$259 


S384-S445 








$430 


$134-$598 






$322 


$406-$44 ', 
S469-S574 








$434 
$544 


$138-$614 
$168-$647 






$334 
$386 



Operational data: 

Mill feed grade g/mt 

Average annual output 10 3 tr oz 

Total availability' 10 3 tr oz 

Producing years from Jan. 1984 

Capital and operating cost data: 

Total capital investment 2 10* dollars 

Capital cost per troy ounce 

Operating cost per troy ounce' 

Total operating plus capital cost per troy 

ounce 

Loog-njn total cost per troy ounce: 

Break-even (0-pct DCFROR) 

10-pct DCFROR 



NAp Not applicable 

'Refined gold estimated to be recoverable as Jan 1984. 

^nrecovered capital investment in mine and mill plant and equipment, infrastructure, and development remaining as of Jan. 1984 and reinvestments 
through life of operation. 
^Mining plus milling cost per ounce of refined gold. 



Table 49. — Supporting data for figure 29: potentially available primary gold in 15 selected operations in Canada 



$400 or less 
$500 or less 
$600 or less 
Ove' $600 



Break-even DCFROR 



Cost or price 

level per 

troy ounce 



Available gold. 

10 3 tr oz 

(cumulative) 



Number 

of 

mines 

(cumulative) 



1 1 .774 
22.247 
22.819 
23.483 



7 
12 
14 
15 



10-pct DCFROR 



Available gold, 

10 3 tr oz 

(cumulative) 



Number 

of 

mines 

(cumulative) 



8.369 
14.115 
22,819 
23,483 



5 
10 
14 
15 



Table 50. — Summary results of 1984 long-run cost determination analyses for three developing mines in the 

Hemlo District of Ontario, Canada 



Range 



Total or 
weighted average 



Cce'aional data: 

Mill feed grade 

Average annual output 

Total availability' 

Producing years from Jan 1984 
Capital and operating cost data: 

Total capital investment 2 

Capital cost per troy ounce 

Operating cost per troy ounce 3 

Total operating plus capital cost per troy ounce 
Long-run total cost per troy ounce 

Breai'-even (0-pct DCFROR) 

10-pct DCFROR 



g/mt 
10 3 tr oz 
10« tr oz 



10 e dollars 



5.8-10.6 

112-291 

3-6.6 

26-34 

$138 -$353 

$45 -$54 

$93 -$125 

$142 -$179 

$153 $191 
$21 8 $294 



7.0 
676 
16.0 
NAp 

$804 

$50 

$109 

$160 

$170 
$255 



NAp Not applicable 

ed gold estimated to be recoverable as of Jan 1984. 
*Unrecovered capital investment in mine and mill plant and equipment, infrastructure, and development remaining as of Jan 1984 and reinvestments through 



*Un recovered caprtai 
life of operation. 
'Mining plus milling cost per ounce of refined gold 



Table 51. — Supporting data for figure 32: potentially available primary gold in 18 major operations in Canada 



Break-even DCFROR 



COSI 01 01 H 

level per 

troy ounce 



Available gold 
10 3 • 
(cumulative) 



Number 

of 

mines 

(cumulative) 



10-pct DCFROR 



Available gold. 

10 3 tr oz 

(cumulative) 



Number 

of 

mines 

(cumulative) 



\2'/, or ess 
MOO oi ess 
$=:•: -.- ess 
KXM Of ess 
Over BOO 



16.042 (Hemlo) 

27.816 

36.298 

36.861 

39.525 



3 
10 
15 
17 
16 




24.411 
30.157 
38.861 
39 525 




8 

13 
17 
18 



._- 



58 



are marginal, the future of the operation is dependent upon 
the economics of underground production. 

One entirely surface mine was evaluated under the 
assumption of production beginning in 1984; this mine 
would be marginally profitable at $400/tr oz gold despite 
a low average grade and high capital costs. These 
detriments would be offset by relatively low surface mine 
operating costs per ounce of recovered gold resulting from 
economies of scale at high annual production rates. In the 
Western United States, the economics of gold mining have 
come to favor large-scale, surface-minable material; 
however, in Canada the potential of the future will still lie 
with high-grade underground producers. 

Total Potential Gold Availability 

Figures 28 and 29 and table 49 relate long-run total cost 
to cumulative availability. As shown, approximately 50 pet 
of total recoverable gold from the 15 operations is available 
at a break-even price of $400, while only 35 pet is available 
at $400 under the 10-pct-rate-of-return criterion. All of the 
underground operations breaking even at $400 or less are 
older producers that have remained in continuous opera- 
tion. At a break-even price of $500, fully 97 pet of total gold 
is available. 

In contrast to the availability position of Canadian gold 
mines under a break-even cost-price scenario, rate of return 
analyses performed using a 10-pct discount rate determined 
that only 5 mines oprate profitably at $400, 10 mines at 
$500, and 14 mines a $600. Current 1984 gold prices are 
therefore not sufficient to maintain long-run profitability 
for two-thirds of the Canadian gold mines under these re- 
quirements. One reminder of this is the recent action taken 
at one of the highest cost producers herein evaluated, which 
indefinitely closed three of the six mines that comprised the 
total operation owing to the depressed level of 1984 gold 
prices. This operation is one of the lowest grade producers 
in Canada and as such is very vulnerable to falling gold 
prices (34, p. 10). 

Annual Gold Production Potential 

On an average annual basis, available mine production 
for all 15 evaluated mines (less Hemlo District operations) 
ranges from 37,000 to 223,000 tr oz/yr for a total of 1.255 
million tr oz. Output from the 14 mines that actually pro- 
duced in 1983 was approximately 1.328 million tr oz, or 
around 58 pet of Canadian production in that year. 
Byproduct gold production contributed 20 pet to 1983 out- 
put, while production from smaller hard rock gold mines 
and placer operations accounted for the remaining 22 pet. 
The 14 evaluated producing operations are considered to 
represent the basic core of the Canadian gold mining in- 
dustry as of 1984. Based on the present trend in Canada, 
primary gold producers should account for higher percen- 
tages of annual output over the long term, given the increas- 
ing development of new primary mines such as the three 
developing Hemlo operations. 

Annual output potentially available from these 15 ma- 
jor operations, from 1984 to 2000 at break-even cost-price 
levels of $400 and $600, is shown in figure 30. At $400/tr 
oz, approximately 1.0 million tr oz of annual production is 
available from 1985 through 1990, declining to 500,000 tr 
oz by 1996. This level of output is derived from nine opera- 
tions, eight of which have been producing for many years. 
As ongoing exploration and development activity at these 



mines continues, the lives of the operations could be ex- 
tended well beyond the life as determined by current 
estimates of demonstrated resources. At a cost-price level 
of $600/tr oz or less, a production level of approximately 
1.5 million tr oz is available during the 1985-90. Available 
output at this cost-price level also declines steadily until 
1996, at which time only six operations have remaining 
resources which represent approximately 820,000 tr oz of 
available production. The two highest cost operations are 
both fully exploited by 1990. 

Three factors must be stressed. First, the analyses en- 
compassed 14 of Canada's largest primary gold producing 
operations, representing approximately 58 pet of 1983 pro- 
duction. Second, mine lives were determined according to 
current estimates of demonstrated resources; however, the 
lives of all of these mines mayh be extended well beyond 
their current limits by further exploration. Third, the long- 
term annual amount of available byproduct gold produc- 
tion is very hard to estimate given the uncertain economic 
outlook for many of the base metal producers. In 1980, 
byproduct gold production accounted for 34 pet of the total; 
this percentage had dropped to 20 pet by 1983 and is ex- 
pected to fall farther in the future. 

This analysis so far has looked only at current gold pro- 
ducers and one nonproducing surface deposit. Three new, 
world-class operations in the Hemlo District of Ontario 
Province should begin to add substantially to Canadian out- 
put by 1985-86, thereby raising the relative share of 
primary production. The potential of this region is only now 
beginning to be realized. The very significant impacts in 
terms of both production and cost of these three operations 
are evaluated separately below. 



HEMLO GOLD DISTRICT 
Background 

The Hemlo District is the most significant new gold 
discovery in Canada in at least two decades. The history 
of exploration efforts in the area goes back to 1947. The first 
major discoveries were made in 1981 by International Cor- 
ona Resources. Resource estimates for the district have con- 
sistently increased since that time. To date, three proper- 
ties have outlined resource estimates sufficient to warrant 
the development of major gold mines. The three properties 
are (1) the Teck-Corona property, (2) the Lac Minerals prop- 
erty (Oilman-Williams claim), and (3) the Goliath-Golden 
Sceptre-Noranda property known as the Golden Giant Mine. 

The changing resource position of these three proper- 
ties since 1981 underscores the very dynamic nature of gold 
exploration not only in Canada but in other major gold pro- 
ducing nations as well. For example, the first feasibility 
study of the Teck-Corona property, which encompassed ex- 
ploration results through December 1, 1981, reported 
"reseves" of more than 1.0 million mt of ore (35). By late 
1983, it was reported that the property contained 4.7 million 
mt at a grade of 12 g/mt (36, p. 23). This was revised up- 
ward again, and in 1984 it was reported that the property 
contained 8.4 million mt at 12.3 g/mt (37, p. B-38). Similar- 
ly, published resource estimates at the Lac Minerals 
property grew from 2.7 million mt of ore at 6.0 g/mt in ear- 
ly 1983 (38, p. 75) to 42.0 million mt at 6.9 g/mt by late 1983 
(39, p. 442). Published resource estimates at the Golden 
Giant property have shown similar upward revisions over 
comparable time spans. 



59 



a? 

en 



600 



70O 



600 



500 



. 400 



V) 

O 
o 

_) 
< 
t 
o 



300 



200 



100 



KEY 
Y///X 10-pctDCFROR 

I J Operating costs 

I Capital costs 



rl 



YA 



^li 



£ 



^ 



2 



i 



1 



R I 



1 




Figure 28. — Contribution of capital and operating coat 
to total production coat for 15 aalactad Canadian 

operations. 



sot 



X *y - 
0> 






10-pct DCFR0R 



^Ji 



—-K 



Breok-even DCFROR 



TOTAL RECOVERABLE GOLD, tC^troi 

Figure 20. — Potential total Canadian primary gold 
available at varioua production coat levels from 15 
selected oparatlona aa of January 1084. 

This study currently estimates that the three proper- 
ties in total contain approximately 72.5 million mt of 
recoverable ore with weighted average diluted grades from 
5.8 to 10.6 g/mt. Total contained gold is approximately 16.4 
million tr oz. Table 50 contains summary data of the 
economic analyses. 

The results underscore the highly favorable economics 
of these operations. Break-even cost determinations range 
from $153/tr oz to $191/tr oz gold with a weighted average 
of $170; cost determinations at the 10-pct DCFROR level 
range from $21&'tr oz to $294 tr oz with a weighted average 
of $255. Operating costs per ounce are quite low ($93 to 
$125j, and given the large amount of available gold, capital 
costs per ounce are also low ($45 to $54 j. These cost 



estimates are significantly lower than those determined for 
all three of the newest gold producers in Canada and in- 
deed are lower than those for all but the largest and highest 
grade older producers that were also evaluated. The major 
reason for the favorable economics at the Hemlo properties 
is the capability to mine high-grade material over very large 
mining widths, which allows the use of high-volume min- 
ing methods that are inexpensive by comparison to the 
methods that must be employed at most of the other 
underground gold mines in Canada. 

Average annual production levels at the three Hemlo 
operations will range between 90,000 and 253,000 tr oz, and 
initial estimates of productive lives range from 26 to 34 yr. 
Total available gold from each property ranges from 3.0 to 
6.6 million tr oz. As of early 1984, the three operations are 
estimated to have a total potential of producing 16.0 million 
tr oz of refined gold over their lives. 



20 


' 1 1 1 


— T ! 1 1 




1 5 

M 
O 


/*~ "^ 


^^0-$6O0 


- 










o 

_) 
o 
o 




5 


I i I 




X 




, 1 1 1 


\ 



20O0 



Figure 30. — Potential annual Canadian primary gold 
available at various break-even production coat levels 
from 10 selected operations, 1084-2OOO. 



60 



Impact of the Hemlo District Upon Future 
Annual Canadian Gold Output 

The impact of these three operations upon annual Cana- 
dian gold output will be dramatic. Figure 31 shows com- 
bined annual output for these three mines for 1984-2010 
at a break-even price-cost level of $200. According to this 
scenario, the Golden Giant Mine will begin producing in 
late 1984, the Teck/Corona property will have its initial pro- 
duction in 1985, and Lac Minerals (the largest of the three 
operations) will start producing in 1986. Full-capacity pro- 
duction, as initially designed, will be achieved by the 
Teck/Corona and Golden Giant Mines in 1987, with the Lac 
Minerals property expected to reach its full-capacity level 
in 1989. From 1989 through 2006 a combined annual out- 
put of 676,000 tr oz is anticipated. Production would decline 
thereafter if no further exploitable resources are added, 
which is considered unlikely. In any event, just the con- 
tained gold already demonstrated in these three properties 
will sustain a high level of production for about 20 yr. 

In table 51 and figure 32, total Canadian gold availabili- 
ty is depicted for the original 15 evaluated properties com- 
bined with the available gold of the three Hemlo district 
mines. With 100 pet of the 16.042 million tr oz of recoverable 
gold at the three Hemlo operations available at a break- 
even cost-price level of $200/tr oz or less and below $300/tr 
oz at the 10-pct DCFROR level, these mines should come 
to represent the low-cost "core" of the Canadian gold min- 
ing industry. For example, when combined with the other 
15 operations discussed earlier, the Hemlo operations in- 
crease the total available gold in Canada at the $400 cost- 
price level by 136 pet. At a 10-pct rate of return, the total 
available gold at the $400 cost-price level is almost three 
times higher when the Hemlo mines are included. 

The effect of the Hemlo mines on future annual output 
will be to significantly raise available production from major 
Canadian gold mines at all cost-price levels. Figure 33 pro- 
vides estimates of future production potential through the 
' year 2000 for all 18 primary gold operations. Production 
from the three developing Hemlo mines will ensure that 
production from the major primary operations surpasses 2 
million tr oz /yr during 1988-90 and remains above 1 
million tr oz through the year 2000, even in the absence 
of further increases to demonstrated resources and annual 
capacity at the other properties. 

Cumulative Canadian output during the 1989-2000 
period, for all major mines producing at $410 tr oz or less, 
rises to 15 million tr oz with production from Hemlo, an 
increase of 85 pet. At $510 tr oz or less, cumulative output 
during the same period rises to 19.6 million tr oz, an in- 
crease of 69 pet. Production from the Hemlo gold district 
should ensure that Canada remains the third or fourth 
largest world gold producer for the foreseeable future. 



TOTAL ANNUAL PRODUCTION POTENTIAL 
TO 1990, ALL SOURCES 

This study concentrate upon 18 major primary opera- 
tions which form the core of both current and future pro- 
duction potential. But the gold mining industry of Canada 
is complex and under dynamic growth with smaller opera- 
tions beginning production and closing each year. An 
analysis of all primary producers in operation during 
1981-82 determined that 19 additional lode gold producers 
were not cost-evaluated in this study. It was further deter- 



1 1 1 1 


■ / 


\O-$2O0 


/ 


i i 



1984 



1990 



1995 



2000 



2005 



2CH0 



Figure 31. — Potential annual primary gold production 
from throe developing mines In the Hemlo District, Ontario, 
Canada, 1934-2010. 



600 - 



O 300 



_ 


— 1 1 1 1 1 1 1 




10-pct DCFROR^ / { 






- 


/ / 

s- 1 ^Breok^even DCFROR 

/ 

■ — • 


I 


i i i i i i i 



10 15 20 25 30 35 

TOTAL RECOVERABLE GOLD, I0 6 tr02 



45 



Figure 32.— Potential total Canadian primary gold 
available at various production cost levels from 18 
selected operations as of January 1984. 



mined that these 19 nonevaluated mines accounted for 
about 375,000 to 400,000 tr oz annual gold production and 
that only 5 of the 19 had annual output clearly exceeding 
25,000 tr oz. Thus, the majority of the operations that were 
not evaluated are very small compared to those that were 
evaluated. In fact, a few of these mines were closed, either 
permanently or temporarily, by the low prices of the 
1983-84 period and most of the remainder have reserves 
equivalent to only 3 to 5 yr of production. 

A survey of the 1983-84 period has determined some 
15 other smaller properties (out of a much larger total) that 
appear to have had enough encouraging exploration work 
to warrant either feasibility studies, that are undergoing 
mine development at this time, or that are in the early 
stages of production. Table 52 lists these 15 properties that 
are considered the most likely to be in production as an ad- 
ditional or replacement resource between 1984 and 1990. 
An approximate total production level of 470,000 tr oz/yr 
is possible by 1990 if all 15 are indeed brought into produc- 
tion. The individual estimates are based upon the most re- 
cent published information and are subject to revision as 
the studies and developments progress. 

The following are some of the major economic aspects 
of the 15 properties shown in table 52: 

1. All of these properties will begin production (if they 
are actually developed) with at least 5 to 8 yr worth of 



61 



25 



KEY 

Hemlo 

Other producers 




1984 



1986 



1988 



1990 



1992 



1994 



1996 



1998 



2000 



Figure 33. — Contribution of thro* Hemlo District opera- 
tions to potential annual Canadian primary gold produc- 
tion, 1984-2000. 

Table 52. — Canadian operations considered possible or probable primary gold producers during 1984-90 



Province 
and propety 

Br-tish Column a 

Bralome-P'oneer 

Takla Lake 
Manrtoba: 

Agassi z 

San Antonio 
Ontano 

McBean 

RenaDie (Cullaton Lake) . 

Shoal Lake (Duport) 

Stock Township 

wiieoec 

Aquanus . . . . 

Bousquet-Cadillac 

Croinor-Abigold 

D'Or Vai Times 

Horn Mine 

Russian K c 

Sas'atchewan Bootleg 

Tota' 

NA Not available 
NAp Not applicable 



Status as of 
1983-84 



Under study 
In exploration 

Under study 
do 



In production, April 1984 
Expanding 
In exploration 
Under study 



Developing 

. . do 

In exploration 

Developing 

do 

do 

In production, early 1984 
NAp 



Estimated additional 


Estimated first year 


annual production 
capacity, 10 3 tr oz 


of production 


24 


NA 


30 


NA 


26 


NA 


24 


NA 


23 


1984 


60 


1984 


40 


NA 


35 


1987-88 


25 


1984 


23 


1985 


40 


NA 


23 


1985 


21 


1985 


28 


1985 


10 


1984 


470 


NAp 



reserves available, and a fair proportion will begin produc- 
tion with 10 yr or more worth of reserves. 

2. All but one of the planned mines will be underground 
with expected feed grades ranging from 4.5 to 9.0 g/mt. 

3. The planned surface mine is anticipating mill feed 
grades of 2.8 to 3.0 g/mt. 

4. The range of production capacities is between 10,000 
and 40.000 tr oz yr gold with an average planned size of 
slightly over 25.000 tr oz/yr. 

5. Because they mostly involve "new looks" at past pro- 
ducing operations, the "exploration" programs for the 
underground operations necessarily involve a high amount 
of underground development with extensive rehabilitation 
and extensions to previous workings to gain access to areas 



for exploration. Thus, most exploration and development 
programs for these deposits take 4 to 5 yr from the initial 
exploration stage through the feasibility study stage and 
are high cost, ranging from $3 million to over $10 million, 
depending, of course, upon the "target" size and amount 
of development required. However, because of the high ex- 
ploration requirements, once a decision is made to go ahead 
with a project, the only additional capital requirements will 
be for mine equipment, milling facilities, and associated in- 
frastructure items, and an average-sized operation will only 
take between 1.5 to 2 yr to get into full production. 

For the following complete scenario of prospective future 
gold production, it has been assumed that byproduct, gold 
production in 1990 will average between 350,000 and 



62 

Table 53. — Potential annual Canadian gold production PRIMARY GOLD MILLING MAJOR 

by 1990, by type of operation OPERATIONS IN CANADA 

Type of operation Tota m r tr range ' P x c \ ? f A discussion of estimated mine operating costs at the 

p-. ; 18 primary gold operations can be summarized by examin- 

Major producers (includes ing 20 separate mine operating cost estimates (17 

Hemlo District 2,100 60-68 underground and 3 surface mining estimates). Although a 

Developing, in early stage of .. ~ ., , ,. ° . „ . P 

production, or considered majority ot primary gold production in Canada comes from 

probable for development underground mines, some of the operations utilize both sur- 

Base metal operations 21 16_19 ^ ace and - underground material in their overall production. 

(byproduct) 350-550 13-17 Two examples of this would be the Giant Yellowknife opera- 
Placer operations 2 100-150 3^4 tion> w hkh mines surface and underground material 

Total •- 3,050-3,450 ioo simultaneously, and the Detour Lake operation, which is 

coataTuatlo^ t0 COmP ' ete demons,ra,ed resource and long - term ,0,al currently mining only surface material but is expected to 

2 Assumed to remain constant at 1977-83 average levels. progress to an entirely underground mine by the late 1980's. 

tec aaa 4- u- i. ■ • -i 4. 4. 4. 1 1 x-au Table 54 presents ranges of the 20 estimated mine 

555,000 tr oz, which is similar to output levels of the ,. , ^~ ., ,„ . ,, ,. . ~ , 

moi qo ■ j a i • j«- I** *• a 4. 4.- i operating costs for the 18 primary gold operations in Canada 

1981-83 period. Again, it is difficult to estimate potential ,f , & , , , . ,,*. , , % , j , . ,, . , , 

, j f ,j , , • ,, , • 4.1 i that were evaluated in this study. Included in the table are 

byproduct gold output since the near-term economic outlook ,, , ~ ... , , , . *., , ,, 

e i j j • • ^. • o- i i the number of estimated costs in the range shown, the min- 

tor copper, lead, and zinc remains uncertain, Similarly, . ,, , , ... , 5 ■ 4.1. 4. c 

1 j 4.-/ 4.U4.4.4.T.4.4.1 jiil in g methods and capacities represented in that range of 

placer production (a minor contributor to the total and the ,. , , r c .... °, 

4. • u i \ ■ . j . v • 1 . v 1 nn aaa operating costs, and a measure 01 overall mining produc- 

most variable) is expected to range no higher than 100,000 ,; T . . ~ .-, , j .. ,- , . , , 

4. 1 ea aaa 4. • 1 aaa tivity for the underground operations which includes 
to 150,000 tr oz in 1990. , J ,,, f . j r j j • ■ . ■■ 

m .1 e 1 . 4. ui e o underground labor and prorated surface and administrative 

To summarize the foregoing discussions, table 53 , , b r 

presents this study's estimates of the expected range of total 

gold production by 1990 in Canada from both primary and Sllff ace Mining 

byproduct sources. The estimated range anticipates the 

development of new mines, the expansion of some current Surface mining of primary gold is not significant in 
mines, and the permanent closure of others which for full Canada. As of late 1984, there were only two major mines 
potential would probably require a gold price of at least in Canada producing gold ore entirely with surfacing min- 
$450/tr oz to $500/tr oz. As shown, total Canadian gold pro- ing (one of which was not evaluated for costs in this study 
duction in 1990 could range between 3.0 and 3.4 million and is not included in table 54). In addition, there was one 
tr oz, which would represent the highest level since 1965 major mine at which surface ore represents a portion of the 
and an increase of approximately 1.0 million tr oz over 1984 mill feed. There is also one major proposed surface opera- 
production levels. Around two-thirds of this increase is ex- tion (shown in table 54) which, as of 1984, was still in the 
pected to come from the development of the three major financing stage. Estimated waste-to-ore ratios of the sur- 
Hemlo properties. The remainder is expected to come from face mines evaluated for costs ranged from 0.56 to 3.5 mt 
a number of smaller producers. The single most important waste per ton of ore. The estimated surface mine operating 
point to stress is that the major primary operations that costs in Canada for the mines with capacities greater than 
were cost-evaluated represent (at 67 pet) the largest source 2,800 mt/d ranged from $1.25/mt to $2.70/mt material 
of assured long-term gold production and basically deter- moved, depending almost entirely upon the mining capaci- 
mine the overall economic competitiveness and growth pro- ty of the operation. The higher cost surface mine shown in 
spects of the Canadian gold mining industry. table 54 represents a sporadic producer which has 

Table 54. — Mining types, operating costs, capacities, and productivity for major Canadian gold operations 



Range of mine 


Number of 




Capacities 


Estimates of overall under- 


operating costs, 
dollars per 


operating 
costs 


Description of mining 
methods within range 


within range, 
mt/d 


ground 
mt 


mining production, 1 
per worker-shift 


ton of ore 


in range 












Underground: 














$10.00 to $20.00 


4 


Long-hole open stoping, 
some shrinkage. 


1 ,670-6,500 






12.5-31.2 


20.01 to $30.00 


5 


Cut-and-fill, shrinkage, 
room-and-pillar, long- 
hole and blasthole open 
stoping. 


1 ,400-5,600 






5.9-13.8 


40.00 to $50.00 


3 


Cut-and-fill, long-hole 
and blasthole open 
stoping, shrinkage. 


1,600-1,900 






2.8-10.0 


50.01 to $60.00 


2 


Open stoping, cut-and- 
fill, square-set 
stoping. 


600-1,000 






3.0- 3.5 


Greater than $60.00 


3 


Cut-and-fill, narrow- 
vein shrinkage. 


400-800 






1.7-3.0 


Total 


17 


NAp 


NAp 






NAp 


Surface: 














Less than $15.00 


2 


0.56-3.5:1.0 waste- 
to-ore ratio. Bench 
(berm). 


2,800-15,700 






NAp 


Greater than $15.00 


1 


3:1 waste-to-ore ratio. 
Bench (berm). 


300-350 






NAp 


Total 


3 


NAp 


NAp 






NAp 



NAp Not applicable, includes prorated and administrative labor. 



63 



anomalously high surface mining costs due to the very low 
capacity and erratic nature of production from year to year. 
Surface mining costs in Canadian primary gold operations 
appear to be about 15 to 25 pet higher than surface mining 
costs at comparable U.S. operations, mostly reflecting a 
higher proportion of costs attributable to labor. It is not ex- 
pected that surface mining will assume a major role in 
primary gold production in Canada in the near future. 

Underground Mining 

The vast majority of primary gold production in Canada 
has been and will continue to be produced by underground 
mines. It is very difficult to generalize or simplify a discus- 
sion of the underground mines producing primary gold in 
Canada, especially in regards to operating costs. 

As shown in table 54, the underground operating costs 
estimated in this study range from slightly more than 
$10 mt to over $60 mt ore feed to the mill. Table 54 shows 
the three interrelated factors — the predominant mining 
method in use, overall underground productivities, and 
daily capacity — that have the greatest influence on the 
overall cost of mining. These categories are, in turn, directly 
related to the economic geology of the gold occurrence (grade 
of gold over a defined width of ore body) and conscious deci- 
sions on the part of the operation's management as to how 
to mine that defined ore body. Thus, the predominant min- 
ing method employed at various times may differ depend- 
ing upon the amount of ore and the gold grade that manage- 
ment wishes to be supplied to the mill. 

One actual (admittedly extreme) example of this in- 
terplay between desired ore feed grade, management deci- 
sions, and the resultant costs should suffice to give the 
reader a better understanding of the complex of factors in- 
volved in determining the overall cost of gold extraction. 

In the last 1970's. a small (450-mt/d) underground mine 
was utilizing a relatively high-cost cut-and-fill mining 
method to produce ore grading a very high 12 to 13 g/mt. 
After the spectacular runup in gold prices during 1978, 
1979, and early 1980, a decision was made by management 
to increase the operation's milling capacity by nearly three 
times, which meant that a comparable increase to the 
underground mining capacity was required. To achieve this 
increase in milling capacity, management decided to con- 
vert the mining method from the high-cost cut-and-fill 
method to a low-cost, high-tonnage long-hole open stoping 
method. 'See table 54 for a comparison of the relative 
operating cost of these methods, i The change was instituted 
quickly, but possibly too quickly because the recoverable 
yield of gold at the mill fell from 12.92 g/mt of ore in 1979 
to 7.8 gmt in 1980 and to an extremely low 4.5 g/mt in 1981. 
This was a decrease of 65 pet in the recoverable grade over 
just a 2-yr period and a decrease of 44 pet in overall gold 
production from 1979 through 1981, despite a 60-pct in- 
crease to the mill's ore feed capacity. In addition, increased 
capital expenditure and declining output coincided with fall- 
ing gold prices during 1980 and 1981. In 1982, to save the 
operation, the company decided to revert to its high-cost cut- 
and-fill method in the majority of the stopes, thus raising 
the feed grade back up to its normally high range '40 I. 

It should be noted that most of the major primary gold 
producers in Canada that have come into production within 
the last few years, or that are planned for production in the 
near future, either utilize or plan to utilize low-cost 
underground mining methods such as blasthole or long-hole 
open stoping or relatively large-scale open pit methods. For 



example, of the nine underground mining costs in the two 
lower ranges shown in table 54, seven are operations that 
have been brought into production since 1968 or will be in 
production in the near future. This is partly a reflection of 
the increase in the price of gold leading to the economic ex- 
traction of lower grade ore bodies and partly a reflection 
of the discovery of a new type of ore body, the Hemlo type, 
which has amazingly large thicknesses (3 to 30 m) that can 
be mined utilizing low-cost, high-tonnage underground 
methods. 

The depth at which major underground gold mines in 
Canada are operating does not, as of this date, appear to 
have a major influence on the overall mining cost. Hoisting 
distances as of the early 1980's range from about 200 m to 
around 2,200 m depths. The only major effect on mining 
costs caused by the depth of mining at the evaluated Cana- 
dian operations is due to losses of productivity at those 
operations which have to make more than one transfer of 
rock or more than one transfer of workers from the surface 
to the working area and vice versa 

Direct plus indirect labor constitutes the major cost item 
in these Canadian underground operating cost estimates, 
averaging 48 pet for the seven long-hole or blasthole open 
stoping operating cost estimates and 63 pet for the 10 opera- 
tions using either a mix of low- and high-cost mining 
methods or solely high-cost methods such as cut-and-fill, 
shrinkage and square-set stoping. 

GOLD MILLING IN CANADA 
OPERATIONS 

The 18 Canadian primary gold operations evaluated in 
this study represent 19 individual mills that are or will be 
treating ore from 25 individual mines and at least 26 dif- 
ferent ore types. All but 4 of the 19 mills were in produc- 
tion as of 1983, with all 4 nonproducers in the financing 
or development stage as of 1983. 

Of the 15 mills in operation in 1983, 7 were originally 
constructed during the 1930's, 3 were initially built in the 
1940's, 2 were commissioned in the 1960's, and 3 were 
brought into production during 1980-82. As of 1983, only 
1 of the 15 mills was accepting ore for custom milling from 
mines in the immediate vicinity, while another large mill 
was contemplating such a policy owing to projected deple- 
tion of its own ore reserves. 

Design capacities as of the early 1980's for the 15 mills 
in operation ranged from 430 to 2,700 mt/d with 5 mills 
treating less than 1,000 mt/d and 10 mills treating more 
than 1,000 mt/d. In some cases, utilization as of the early 
1980's was as low as 75 pet of design capacity. In general, 
this reflected hoisting constraints or conscious managment 
decisions rather than mill inefficiencies. 

Estimated mill feed grades employed in this analysis 
for the 15 operating mills range from 3.4 to slightly more 
than 21 g/mt. Of the 15 mills evaluated, 12 were estimated 
to have overall gold recoveries of 90 pet or greater (straight 
average of 94 pet), while 3 either have or are expected to 
have overall gold recoveries of 83 to 85 pet. These lower 
recovery operations seem to reflect both that overall gold 
recovery drops off as the feed grade falls below 4 g/mt and 
that ores where the gold is intimately associated with pyrite 
appear to have lower recoveries. 

Estimated mill operating costs range from $10/mt to 
close to $35/mt ore feed. Four of the mills have operating 
costs in the $10/mt to $12/mt milled range, seven have 
operating costs in the $12.01 to $17 range, and four have 



64 



operating costs in the $17.01 to $35 range. The mills with 
operating costs below $12/mt have large capacities (1,300 
to 1,700 mt/d) and simple flowsheets (crush, grind, vat leach, 
Merrill-Crowe-zinc dust precipitation, smelting to dore 
bullion). Those mills in the $12.01 to $17 range have more 
widely varying capacities (570 to 2,700 mt/d) and slightly 
more complex flowsheets with flotation and/or roasting of 
sulfides involved. Of the four mills with operating costs 
above $17/mt mill feed, two have relatively complicated 
flowsheets involving gravity concentration, flotation, and 
roasting; one operation has an extremely remote location; 
and two operations have relatively small capacities. Of note 
is the fact that all four of the mills with operating costs 
above $17/mt also have very good mill feed grades of greater 
than 10 g/mt ore milled. 

Table 55 summarizes the methods of gold recovery in 
use as of the early 1980's at the major Canadian gold mills 
analyzed. As of 1981, only four operating mills had jigs in 
circuit with their grinding units to recover coarse, free gold. 
A high percentage of Canadian mills were utilizing a flota- 
tion and/or roasting stage for treatment prior to the cyanide 
leaching stage. These two points reflect the basic nature 
of most Canadian primary gold ores, in which the gold is 
highly associated with sulfide mineralization (especially 
arsenopyrite, pyrite, and pyrrhotite) and is usually present 
in a finely divided, disseminated state rather than as coarse 
grains. Also of interest is that 14 of the 15 mills utilize the 
Merrill-Crowe-zinc dust precipitation method of extracting 
gold from the cyanide solution, while only one mill utilizes 
the relatively new carbon-in-pulp method as the main 9 ex- 
traction method. The predominance of the Merrill-Crowe- 
zinc dust precipitation method reflects the fact that 12 of 
the 15 mills were constructed prior to 1969, before the period 
of the first major developments in carbon extraction of gold 
technology. Still, of the three mills added during 1980-82, 
two have opted for the more conventional Merrill-Crowe 
method over the newer carbon extraction methods. 

In Canada, there are no large-scale heap leaching opera- 
tions such as are found in the Southwestern United States, 
and none are foreseen in the immediate future. The long 
period of winter weather is a major negative factor in large- 
scale heap leaching. Also, all of the large-scale, economic 
heap-leaching operations in the United States are surface- 
mining mostly oxidized, primary gold deposits, a type of 
deposit that Canada does not appear to have in abundance. 

Refining and Transportation 

As of 1981, five gold refineries in Canada were accept- 
ing dore bullion (primary mine production) for refining 
along with gold scrap and residue (secondary sources). The 
five refineries and their estimated 1981 production 



'As of 1981, 2 of these 14 mills were using minor C/P circuits to recover 
gold from their precipitated roaster gases. 



Table 55. — Summary of milling methods in use at 

major primary gold milling operations in Canada, early 

1980's 

Milling method Number of mills 

(by major milling circuit) using the circuit 

Comminution circuit: 

Crushing-grinding 15 

Jig recovery of free gold 4 

Treatment prior to extraction of gold by cyanide solution: 
Pre-aeration or other pretreatment 

prior to cyanide leach 4 

Float for copper concentrate (for sale) 2 

Float-regrind-roast concentrate 4 

Float-regrind concentrate 1 

Float-regrind pretreat concentrate 1 

Float-roast concentrate 2 

Float-roast concentrate-regrind calcine 1 

None 4 

Extraction of gold: Vat leach with cyanide solution 15 

Precipitation of gold, production of dore bullion: 
Merrill-Crowe-zinc dust precipitation, 

smelt to dore bullion 14 

Carbon-in-pulp (extract and strip gold from 

solution)-electrorowinning onto steel wool-smelt 

to dore bullion 1 

Other processes: 

Electrostatic precipitation of 

roaster gases, recover gold by leaching and 

CIP treatment of precipitates 2 

Leach tails from flotation 1 

Production of As 2 3 from roaster gases 3 

capacities for refined gold production are shown in table 56. 

In addition to the refineries listed in table. 56, Inco 
Metals Co. has a precious metals refinery at Sudbury, On- 
tario, capable of producing about 225,000 tr oz/yr refined 
gold as a byproduct from treating the anode slimes resulting 
from the refining of copper and nickel. Noranda Mines Ltd. 
also has a precious metals refinery at Montreal East, 
Quebec, capable of producing about 720,000 tr oz/yr 
byproduct gold from anode slimes resulting from the elec- 
trolytic refining of copper. 

The majority of the refining capacity shown in table 56 
for treating dore bullion from the gold mines is conveniently 
located in relation to the Quebec and Ontario lode gold 
mines. The Royal Canadian Mint, located in Ottawa, is 
believed to handle most of the newly mined dore bullion 
in Canada. For analysis, it was assumed that all of the dore 
bullion produced at operations in Ontario, Quebec, and the 
Northwest Territories was sent to the Royal Canadian Mint 
at Ottawa for refining, with the dore bullion produced in 
British Columbia being sent to the refinery in British Col- 
umbia. The two operations producing gold-containing cop- 
per concentrates as well as dore bullion were assumed to 
be sending the copper concentrates to Noranda's smelting 
and refining facilities in Quebec. It is not clear where the 
proposed large-scale surface operation analyzed in this study 
will send its bullion if and when it is in production. 
However, indications are that its production level will be 
too high for the refinery in British Columbia, and its bullion 
will probably go to the Royal Canadian Mint refinery. 

As shown in table 56, total Canadian refinery capacity 



Table 56. — 1981 capacities of Canadian dore bullion, 
scrap and residue gold refineries 



Company 


Province 


City 


Estimated production 

capacity, 

10 3 tr oz/yr 


Delta Smelting and Refining 

Co. Ltd. 
Englehard Industries 
Johnson Matthey Ltd. 
Royal Canadian Mint 
Trimount Refininq and Smeltinq 


British Columbia 

Ontario 

... do 

...do 

... do 

NAp 


Richmond 

Aurora 

Toronto 

Ottawa 

Richmond Hill 


250 

630 

2,000 

7,000 

60 


Inc. 

Total 


NAp 


9,940 


NAp Not applicable. 



65 



in 19S1 was nearly 10 million tr oz yr refined gold from new 
dore bullion, scrap, and residues. The 18 properties 
evaluated in this study would account for no more than 
about 1.3 to 2.5 million tr ozyr dore bullion production. 



Thus, it is believed that even with the Hemlo deposits com- 
ing on-stream in the late 1980's, there is sufficient refin- 
ing capacity to handle the increases in gold production fore- 
seen in Canada by 1990. 



AUSTRALIA 



HISTORICAL PERSPECTIVE 

Total gold production between 1851 and 1980 from all 
Australian deposits is estimated to be approximately 190 
million tr oz. or an average of 1.46 million tr oz yr for the 
130-yr period. Approximately 33 pet (63 million tr oz^ of this 
total has come from alluvial mining of tertiary and recent 
river gravels. The remaining 127 million tr oz was produced 
from lode deposits [41, p. 141). 

The first official recordings of gold discoveries in 
Australia were in 1851 in the Provinces of Victoria and New 
South Wales, although the first actual discovery had oc- 
curred as early as 1839 in Victoria Province. Of the 
discoveries in the two Provinces, the Victorian discoveries 
were the most important. Gold production from alluvial 
deposits in Victoria peaked in 1856 at 3 million tr oz/yr, 
and by 1860 attention had turned from alluvial production 
to hard rock mining in the Province. By 1891, production 
in the Victoria goldfields had fallen to about 500,000 tr 
oz.yr, and the search for gold had been expanded to other 
provinces, most notably Western Australia {42). By 1893, 
both the Kalgoorlie and the Norseman Fields Gode deposits) 
in Western Australia had been discovered and were pro- 
ducing. Table 57 provides a brief synopsis of the historical 
production picture in Australia. The table concentrates on 
reported historical production of Victoria Province and the 
Kalgoorlie Goldfield of Western Australia since these two 
areas have accounted for an estimated 118 million of the 
190 million tr oz of total production. 



COMPOSITION OF MINE PRODUCTION OF 
GOLD, 1970-83 

Figure 34 plots reported mine production of gold in 
Australia for 1970-83 (2-3). As shown, the initial reaction 
to free gold markets was an increase in production to 
775,000 tr oz in 1972. However, the combination of a reces- 
sion and declining gold prices caused production to decrease 
to 502,000 tr oz for 1976. The sustained increase in the price 
of gold from September 1976 into 1980 led to a slight re- 
bound, yet by the end of 1981 production was only up 25 
pet over the low level of 1976. It was only in 1982 and 1983 
that the effects of higher gold prices, which caused a surge 
in new mine development, began to show up in substan- 
tially higher production levels, exceeding the 1-million-tr- 
ozyr level in 1983. This was the first time that Australian 
mine production of gold had exceeded the 1-million-tr-oz 
mark since 1963 and represented more than double the 1976 
production level. 

The aggregate production values shown in figure 34 
must be related to an operation-by-operation analysis to bet- 
ter understand the dynamics of the gold mining industry 
in Australia. With that in mind, table 58 provides "snap- 
shots" of certain critical years during the period 1970-83. 

Byproduct and coproduct gold production steadily de- 
clined on a percentage basis over this period, from 46 pet 



Table 57. — Historical summary of mine production of 
gold in Australia, 1851-1 983 * 



Year or 
period 

1851 



Occurrence or development 

First official discoveries in Victoria and New South Wales 
Provinces. 



1859 Production reaches 3 million tr oz/yr from Victoria Province. 

1860's Victoria Province produces an average of 1.6 million tr oz/yr, 

representing essentially 100 pet of Australian production 
and 40 pet of world production. 

1890's . Victoria Province production falls to an average of 500,000 tr 
oz/yr. Western Australian Goldfields (Kalgoorlie and 
Norsemen) discovered and in production. 

1903 Total Australian production reaches what proves to be a 

peak of 3.8 million tr oz. This coincides with the historical 
peak production at the Golden Mile (Kalgoorlie) of 1.0 
million tr oz in 1903. Production in Victoria Province has 
increased to the 800,000-tr-oz/yr range 

1920s Victoria Province production falls to an average of only 

65.000 tr oz/yr for the decade Kalgoorlie's production 
declines to 325,000 tr oz/yr, on average The decline from 
production levels of the early 1900's was attributed mostly 
to rapid inflation of costs following World War I, which 
caused lower grade operations to close. 

1950-67 Victoria Province's production further declines to an average 
of 44,000 tr oz/yr throughout the period Total Western 
Australian production stabilizes in a range of 650,000 to 
850,000 tr oz/yr. 

1968-76. Increasing costs and low gold prices cause total Australian 
production to decrease from 787,000 tr oz in 1968 to an 
all-time low of 502.000 tr oz in 1976. Victoria Province's 
production reaches an almost negligible level of 2,050 and 
6,600 tr oz in 1971 and 1972, respectively. Western 
Australian production decreases to a low of about 250,000 
tr oz in 1976. 

1977-83 Total Australian production increases dramatically from 
502,000 tr oz in 1976 to 1.035 million tr oz in 1983. 
Western Australian production increases from 250,000 tr 
oz in 1976 to 750.000 tr oz in 1983. Increase coincides 
with large rise in the price of gold. 



'Compiled from numerous sources and the authors' own estimates. 

in 1972 to 41 pet in 1976 to 35 pet in 1979 and only 21 pet 
in 1983. The number of operations in this category, however, 
remained nearly constant. Throughout the 1970-83 period, 
the number of major gold producing operations (primary 
plus byproduct and coproduct producers) ranged from 9 to 
13, standing at 12 as of 1983. From 1979 through 1983, the 
primary producers that could be considered major producers 
(the core of the industry) had only increased their annual 
gold output by 40,000 tr oz even though total Australian 
production had increased by 444,000 tr oz. Ninety percent 
of the remaining 404,000-tr-oz increase from 1979 through 
1983 had come from as many as 21 minor primary gold 
operations (those with 5,000 to 30,000 tr oz of annual out- 
put), many of them representing new operations brought 
into production since 1981. Overall for 1983, 36 pet of total 
Australian gold production came from 7 major primary gold 
producers, 35 pet came from 21 minor primary producers, 
21 pet came from byproduct gold producers, and 8 pet came 
from very small, primary gold producers (those producing 
less than 5,000 tr oz/yr). 



66 




1970 1971 I 



1978 1979 I960 1981 1982 1983 



Figure 34.— Australian gold production, 1970-83. 



Table 58. — Operational categorization of Australian mine production of gold in selected years 1 



Year 



Total production, 
10 3 tr oz 



Description of operations producing gold 



1972 755 95 pet (715,000 tr oz) of total production derives from 13 operations, with 5 of the 13 representing byproduct 

producers accounting for about 46 pet. The remaining 5 pet comes from 20 small, primary gold operations (produc- 
ing less than 2,000 tr oz/yr, on average). Western Australia comprises 43 pet and the Northern Territory 33 pet of 
total gold production. Geographic distribution of major gold producers follows: Western Australia — 5 Au mines; 
Northern Territory — 1 Au-Cu-Bi mine, 1 Au mine; Tasmania — 1 Pb-Zn-Au mine, 1 Cu-Au mine; Queensland — 1 
Cu-Au mine; New South Wales — 1 Pb-Zn-Au mine; Victoria — 2 Au mines. 

1976 503 9 of the 13 major operations of 1972 are still producing. It is estimated that these major producers account for 

virtually 100 pet of total Australian mine production. Only 4 of the 9 major operations are primary gold producers. 
The 5 byproduct operations account for 41 pet of production. Western Australia comprises 42 pet and the Northern 
Territory 35 pet of total gold production. Geographic distribution of major gold producers follows: Western Australia 

— 2 Au mines; Northern Territory — 1 Au-Cu-Bi mine, 1 Au mine; Tasmania — 1 Pb-Zn-Au mine, 1 Cu-Au mine; 
Queensland — 1 Cu-Au mine; New South Wales — 1 Pb-Zn-Au mine; Victoria — 1 Au mine. 

1979 597 8 of the 9 major operations of 1976 are still producing. In addition, 1 new major producer, Telfer in Western 

Australia, has been brought into production since 1976. The 9 major operations of 1979 are estimated to account 
for 93 pet of total production (555,000 tr oz) with 6 pet coming from small primary gold operations, mostly in 
Western Australia. The same 5 byproduct producers of 1972 are still producing in 1979. Western Australia 
comprises 59 pet and the Northern Territory 25 pet of total gold production. Geographic distribution of major gold 
producers follows: Western Australia — 3 Au mines; Northern Territory — 1 Au-Cu-Bi mine, 1 Au mine; Tasmania 

— 1 Pb-Zn-Au mine, 1 Cu-Au mine; Queensland — 1 Cu-Au mine; New South Wales — 1 Pb-Zn-Au mine. 
1983 1,035 An estimate of the distribution follows in troy ounces: 

7 major, primary gold operations (over 30,000 tr oz/yr). Includes 6 operations in Western Australia — 305,000 tr 

oz; 1 operation in Queensland — 70,000 tr oz. 
21 primary gold operations (5,000 to 30,000 tr oz/yr). Includes 18 operations in Western Australia — 330,000 tr oz; 1 

operation in Queensland — 10,000 tr oz; 2 other operations — 25,000 tr oz. 
5 byproduct operations (no production criteria). Includes 1 operation in Northern Territories, 1 operation in New 

South Wales, 2 operations in Tasmania, 1 operation in Queensland. 
Very small, primary gold operations (<5,000 tr oz/yr.). Includes unknown number of operations, probably at least 35 

in total, majority in Western Australia. 
Compiled from numerous sources and the authors' own estimates. 



67 



MINOR PRIMARY GOLD OPERATIONS 

None of the 21 minor operations producing in 1983 were 
in production prior to early 1981. Most of these operations 
came into production with only 5 yr or less of reserves and 
an average capacity of about 17,000 tr oz/yr. These opera- 
tions, which required little time to be brought into produc- 
tion, are mostly open pit operations, and many of them use 
heap leach processing methods. They are characterized by 
low capital and operating costs and are very flexible in 
terms of operational characteristics. Many of the operations 
consist of several small deposits feeding a central or custom 
mill; thus, it is virtually impossible to keep accurate account 
of production costs, reserves, and resources at these minor 
producers. 

To put the size of these minor primary producers iii 
Australia into perspective, it is expected that by 1988, over 
20 new operations of similar size will be required just to 
replace the 1983 production level represented by these 
minor, primary producers. Likewise, to add 350,000 to 
400,000 tr oz of additional annual production from this 
category of operation would require that as many as 40 new 
operations be brought into production. It is believed that 
a gold price of $350.tr oz to $450/tr oz is a sufficient economic 
incentive for these minor, primary gold producers, but the 
generally small amount of resources available for treatment 
could be a major concern. It is possible, depending upon the 
price of gold, that these operations could account for 500,000 
to 700,000 tr oz of production in any given year, but it would 
probably be difficult to sustain this level very long. 



MAJOR BYPRODUCT GOLD OPERATIONS 

The five major byproduct gold producers in Australia 
that have produced throughout the 1972-83 period are the 
Tennant Creek, Mount Chalmers, Broken Hill, 
Rosebery/Hurcules, and Mt. Lyell operations. 

At the Tennant Creek operations of Peko-Wallsend in 
the Northern Territories, overall production of gold declined 
from 208,000 tr oz in 1972 to 115,000 tr oz in 1983. However, 
the company felt, as of 1980-81, that it had a good chance 
of finding at least four or five ore bodies similar to the 
Warrego ore body (41, p. 141). It is believed that, if found, 
these would be utilized more as replacement mines to pro- 
long the life of the operations rather than to increase pro- 
duction dramatically. At present, the mine has 11 yr worth 
of proven reserves. 

The Mount Chalmers operation is a copper mine that 
produces 30,000 to 40,000 tr oz.yr gold. Estimated reserves 
at this long-time producer represent only about 2 to 3 yr 
worth of production. The other three major byproduct gold 
producers in Australia all have 10 to 30 yr worth of proven 
reserves. 



Based on the proven reserve situation described above, 
it is expected that the 1979-83 level of byproduct gold pro- 
duction of 200,000 to 220,000 tr oz/yr should be easily main- 
tained for 10 to 20 yr; however, unless new discoveries are 
made, there is very little room for major increases in 
byproduct production above that level. 



RESOURCE OVERVIEW, 1984 

The level of demonstrated gold resources in Australia 
has been changing rapidly over the last few years as ex- 
ploration and development activity have intensified. As a 
consequence of this high level of activity, any estimate of 
gold reserves or resources will likely be outdated in a very 
short time. 

The Australian Government estimated "demonstrated 
economic resources" of gold as of December 31, 1979, at ap- 
proximately 9.0 million tr oz. As of December 31, 1980, this 
estimate was revised upward to 10.7 million tr oz. Total 
identified resources at that time were estimated at 14.0 
million tr oz. An additional 4.8 million tr oz was classified 
as "contained in potential ore presently being developed." 
(43, p. 171). 

A summary of the aggregate resource data estimated 
for this study is listed in table 59. For this study, a 1984 
demonstrated resource of 6.7 million tr oz of contained gold 
was estimated for the seven largest primary producers. In 
addition, seven primary lead-zinc and copper properties 
were estimated to contain approximately 2.5 million tr oz 
of byproduct gold. Also reported in this study are 
preliminary estimates of approximately 11.0 million tr oz 
of gold contained in 17 other new properties in various 
stages of exploration and development, or in producing 
mines that were too small to meet the established criteria 
for complete economic evaluation. These latter resource 
estimates are reported separately and are not included as 
"demonstrated" resources owing to the absence of sufficient 
data to enable a more complete geologic verification of the 
resource estimates. The Olympic Dam/Roxby Downs proj- 
ect and the Deep Leads project are listed separately owing 
to their very large estimates of around 60.0 million tr oz 
of potentially contained gold. Figures 35 and 36 show the 
location of major primary and byproduct gold properties in 
Australia, designated by production status and inclusion 
in the cost analyses. 

GOLD AVAILABILITY AND PRODUCTION COST 

EVALUATION: SEVEN MAJOR PRIMARY 

PRODUCERS 

The seven evaluated primary gold operations in total 
were estimated to contain approximately 64 million mt of 
demonstrated resources as of January 1984. Mill feed grades 



Table 50.— Aggregate gold resource data for selected Australian mines and deposits, 1984 



„, . . Number of 

Classification properties 

Major demonstrated primary producers 7 

Other primary properties' 17 

Byproduct gold producers __7 

Total 31 
Poss'We major go»d producers 

Otymptc Dam and Deep Leads 2 

NAp Not applicable 
For details on name, current development status, and estimated annual output, see table 61 



Contained gold, 
10 3 tr oz 



Recoverable gold, 
10 3 tr oz 



6.700 

11.000 

2,500 



20,200 
60,000 



6.400 
NAp 

NAp 



NAp 
NAp 



68 



INDIAN OCEAN 



Coral Sea " N 




g.oonjjabla-parkes 

ydney 



INDIAN OCEAN 



o Tasman Sea 



Hobort 
TASMANIA 



LEGEND 

• Cities 

(Xl Costed, producing gold mines 
® Byproduct gold producers 
(£) Possible gold producers, 1984-90 
yyyfy Areas of Paleozoic exposures 
\\] Areas of Proterozoic environments 

fc'/J Archean environments of Western 
Australia 



soo 



Scole, km 



Figure 35.— Location of producing and prospective gold mining operations in Australia and areas of primary gold 
deposits. 




PAD0INGT0N;^,^Vj; 



BLACK HILLS 



.HORSESHOE LIGHTS 
X /^SONS OF GWALIA 

^ronnirRr- 

PERSERVERANCE 

-PARINGA 
FIMIS10N LEASES 
MT CHARLOTTE 
/ Kolgoorlie 




LEGEND 
• Cities 

?? Costed, producing gold mines 
H Noncosted, producing gold mines 
X Possible gold producers 1984-90 



500 

i 



Scole, km 



Figure 36. — Producing and prospective gold mining 
operations in Western Australia. 



69 



Table 60. — Summary result* of 1984 long-run cost determination analyses for major Australian primary gold mines producing In 1B83 



Primarily underground mining 



Range 



Total or 
weighted average 



Entirely surface mining 

Ram J* 8 ' °' 

_ weighted average 

Ope'atonai data 

Ma teed g'ade p/mt 1.0-5.0 3 6 

Annual output 10 3 tr oz 45-65 110 

Total availability' I0»tro2 ... 400-1.100 1.4912 

Producing yeara from Jan 1964 9-17 NAp 

Capital and operating cost data 

Total capital investment' 10* doaanj $21-$51 $72 5 

Caprtai cost per coy ounce NAp $48 

Operating cost per troy ounce* $24O-$310 $291 

Total operating plua capital 

coat par troy ounce $290-$360 $339 

Long-run total coat par troy ounce 

Break-even (0-pct DCFBOB) $325-$365 $353 

10-pct DCFRQB $340-4360 $368 

NAp Not applcab»e 

•Banned gold estimated to be recoverable as o< Jan 1964 

■Unrecovered capital investment m mine and mill plant and equipment, kifraetnjcture. and development remaining aa ol Jan. 1964 and reinvestments through Hie ot operation. 

1 *rang plua maing coat per troy ounce ol refined gold 



Grand 
totals 



40-120 

25-120 

225-1.600 

8-23 



$30-$130 

$45-$135 

$150-$315 

$192-4344 



$200-$4 77 
$242-$513 



7.0 

304 

4.6763 

NAp 



$357 3 

$73 

$222 

$295 



$310 
$345 



NAp 

414 

6,3675 

NAp 



$4298 
NAp 
NAp 



NAp 



NAp 
NAp 



were estimated to range from 1.1 g/mt (for a tailings 
reprocessing operation) to 11.6 g mt. 

Total gold contained in the 64-million-mt resource is 
estimated at 6.7 million tr oz, with total recoverable refined 
gold estimated at approximately 6.4 million tr oz. Two of 
the seven primary producers are old (primarily 
underground) operations which closed in the 1970's due to 
low market prices and rising production costs. With the 
rapid increase in gold price in the late 1970's, these mines 
were reopened with the expectation that prices would re- 
main high or continue to increase. Recent decreases in the 
price of gold have again put the long-term economics of these 
two operations into question; both require long-term prices 
significantly above the $400 base price in order to 
break -even. 

Another two of the primary producers are also old (most- 
ly underground) operations that have remained in con- 
tinuous production throughout their lives and are highly 
profitable at $400 gold, and two of the evaluated operations 
represent new producers that have been in production 5 yr 
or less. Of these two "new" operations, one is a surface mine 
that remains profitable at current gold prices and one is 
an underground producer that is considered subeconomic 
at the current base price. Also included in this analysis is 
a tailings project that has been producing profitably for 
several years. Average annual output for the seven 
evaluated major primary gold operations ranges from 
25,000 to 119,000 tr oz/yr. The seven operations should 
represent a combined output of 458,000 tr oz of gold pro- 
duction as of 1984. 

Table 60 presents summary data on the cost determina- 
tion analyses for the seven primary gold producers. This 
table details the relationship between the major economic 
cost -determining factors such as mill feed grade (a measure 
of resource quality;, available annual production (a measure 
of output quantity or resource flow;, total refined gold poten- 
tially recoverable (a measure of total product quantity or 
resource stock), the number of future producing years as 
of January 1984 (the time element;, total capital investment 
to be recovered, and capital and operating costs per ounce 
of recoverable gold. 

In the case of the evaluated Australian surface mines, 
total capital investments to be recovered over the life of the 
operation range from $21 to $51 million, whereas in the 
case of the underground mines the range is from $30 to $130 
million. However, owing to higher grade material at the 
underground mines, capital costs per ounce of recoverable 
gold are not significantly different. For the seven major 



primary gold producers herein evaluated, long-run total 
break-even production costs average $353/tr oz for surface 
production and $310/tr oz for underground production. Long- 
run production costs, which include a 10-pct rate of return 
on invested capital, average $368/tr oz for surface produc- 
tion and $345/tr oz for underground production. 

Clearly, an operator interested in quick payback and 
low total initial capital investments will favor surface prop- 
erties, especially small ones. This is why, as shown in table 
58, a significant percentage of 1983 production is accounted 
for by some 21 small, primary gold operations, most of which 
are surface mines with typical outputs ranging from 5,000 
to 30,000 tr oz/yr. 

On an individual mine basis, this analysis indicates that 
the three new or reopened major underground operations 
in Australia represented gambles in that gold prices of 
around $500 are required in order for all costs to be 
recovered while attaining a minimum 10-pct rate of return. 
In the late 1970's, when the development or redevelopment 
decisions for these operations were made, the long-term 
price outlook was much more optimistic than that of 1984. 

As was shown in the Canadian analysis, older produc- 
ing mines that have remained in continuous operation 
possess a number of economic advantages. They have 
recouped most or all of their initial capital investments and 
generally have higher grade ore and larger annual output 
capacities. For these older producing operations, the pro- 
duction decision is largely dependent upon operating costs, 
with capital investment recovery representing only a small 
part of total production costs. For example, at one new pro- 
ducing operation, approximately $132/tr oz gold produced 
is required to recover $29.5 million in capital investments 
over 9 yr, whereas one of the established producers requires 
only $71/tr oz gold produced to recover $127.3 million in 
capital investments over 15 yr. 

Separate analyses were performed in which long-run 
rates of return were determined for each of these seven 
mines given gold prices of $400, $500, and $600 per ounce, 
respectively, and a 10-pct discount rate. In all cases the price 
of byproduct silver production was held constant at $10/tr 
oz. The results indicate that at $400 gold, three of the seven 
operations have zero or negative long-run rates of return, 
i.e., these three operations require gold prices in excess of 
$400/tr oz for long-run profitability. Four of the seven mines 
(containing 76 pet of the 6.4 million oz of recoverable gold) 
are highly profitable at the base price of $400/tr oz. 

At $500 gold, six of the seven mines are profitable by 
the criteria of this analysis with long-run rates of return 



70 



Tabic 61.— Australian doposHs consldarad possible or probabls goM producer* during 1084-90 



Province or Territory 

and operation 

Northern Territory: Pine Creek 

New South Wales: Goonuabla-Parkes 

Queensland: 

Kktotoo 

Mt. Rawdon 

Red Dome (Mungana) 

South Australia: Olympic Dam-Roxby Downs 

Western Australia: 

Bamboo Creek 

Big Bell 

Black Hills 

Golden Crown 

Harbor Lights 

Horseshoe Lights 

Nevoria 

Paddington 

Paringa 

Porphyry-Perseverance 

Sons ot Gwalia 

Wiluna Tailings 

Total 

NAp not applicable. 'Byproduct. 



Status as of 1983-84 

Feasibility study stage 

Explored deposit 

In development, initial 
production 1985 

Feasibility study stage 

do 

Feasibility study stage, 
development approval 
received 1984 

In development 

Explored deposit 

Feasibility study stage 

In development 

do 

In production 

In development 

do 

In production 

Feasibility study stage 

In development 

In production 

NAp 



Estimated annual 
production 1QJ Ir oz 



Estimated first year 
ot lull production 



50 
180 



190 

125 

70 

'105 



30 
45 
40 
35 
100 
30 
25 
80 
35 
30 
20 
30 



Post 1985. 
Post 1985. 



1988-87. 
Post 1985. 
Post 1985. 
Post 1989. 



1986. 

Post 1985. 

1987. 

1986. 

1987. 

1984. 

1985. 

1966. 

1984. 

1986. 

Post 1985. 

1985. 



1,120 



NAp. 



exceeding the 10-pct discount factor. Long-run prices in ex- 
cess of $513/tr oz are required for all seven mines to operate 
profitably. 

These analyses indicate that the three new or 
redeveloped mines may not remain in production for the 
entire life of their demonstrated resource unless long-run 
gold prices remain above $400/tr oz. The other four opera- 
tions clearly demonstrate economic production at current 
1984 prices. 

The seven evaluated producers each have sufficient cur- 
rent demonstrated resources to allow for a minimum of 8 
yr of production assuming sufficient gold prices. Two of the 
seven are expected to produce until at least the turn of the 
century but will account for only around 100,000 tr oz of 
combined output in 2000. These latter two mines are low- 
cost producers and are economic at current prices. Clearly, 
for Australia to maintain production at current levels will 
require the continued discovery and development of new 
mines. The potential for new mine development is exam- 
ined in the following section. 

MAJOR PRIMARY AND BYPRODUCT 

GOLD DEPOSITS AWAITING OR 

UNDER DEVELOPMENT 

During the last few years, exploration and development 
activity in the Australian gold industry has been very 
dynamic. Many new exploration projects and development 
decisions have been reported in the literature in just the 
past 2 yr. Table 61 lists 18 major primary and byproduct 
gold deposits that have basically been fully explored and 
were in various stages of study or development as of 
1983-84. Several of the properties have already produced 
small amounts of gold. The criterion for inclusion in this 
list was a minimum of 100,000 tr oz contained gold in the 
reported reserves. These deposits represent the largest con- 
tained gold reserves being reported for the entire country 
as of 1983-84. 

Of the 18 deposits, 16 are primary gold deposits and 2 
are byproduct gold products. Of the 16 primary gold 
deposits, 12 are located in Western Australia, 3 are located 
in Queensland and 1 is located in the Northern Territories. 
Ten of the 12 primary gold deposits in Western Australia 
will likely produce at a level of at least 30,000 tr oz/yr with 
an average output of 50,000 tr oz/yr. It is estimated that 



the 12 deposits in Western Australia could account for 
500,000 tr oz/yr of additional gold production if they all come 
into production during the same time period. It is more like- 
ly that by late 1986 or 1987, 9 of the 12 will be in produc- 
tion and could account for around 350,000 tr oz of additional 
Western Australian production. 

The four primary deposits located in Queensland and 
the Northern Territory are more questionable as to their 
possible development because they are all lower grade 
deposits in the range of 2.3 to 3.4 g/mt. As of late 1984, it 
appeared that one of the deposits would definitely be 
developed with another likely to be developed and the re- 
maining two definitely "on hold." The three deposits in 
Queensland would represent an estimated 385,000 tr oz of 
additional annual gold production if all were brought into 
production in the same time period. 

It must be emphasized that some of the individual prop- 
erty data included in this table must be considered 
speculative at this time. Within this list of 18 properties 
are two noteworthy mine developments, both proposed as 
surface mines, that appear to have a high probability of 
eventual production. One of these is the Harbour Lights pro- 
ject in Western Australia, which is estimated to contain up 
to 1 million tr oz of gold and could begin initial production 
by late 1985 (44, p. 230). The other project of note is the 
Kidston project in Queensland, estimated to contain around 
2.2 million tr oz of gold, which could be in full production 
by late 1985; preliminary estimates for the first 5 yr of pro- 
duction average around 190,000 tr oz/yr (45, p. 199), which 
would make it Australia's largest producing mine. 

One potential byproduct operation that warrants atten- 
tion is the Olympic Dam/Roxby Downs primary copper pros- 
pect in South Australia. Olympic Dam is estimated to con- 
tain 2 billion mt of minable material grading 0.6 g/mt gold, 
or approximately 38.6 million tr oz of contained gold (46, 
p. 62). This deposit, if developed as presently planned, would 
have a very long life, probably in excess of 50 yr, and thus 
would not represent a major influence on annual Australian 
gold production since its annual gold output would probably 
be only slightly greater than 100,000 oz/yr. The develop- 
ment of Olympic Dam/Roxby Downs remains very much in 
doubt at this time, even though the project has received 
development approval. The project has some major technical 
and economic obstacles which must be overcome before any 
definitive development decision can be anticipated. 



71 



MINING METHODS AND OPERATING COSTS 

A unique characteristic of the major Australian gold pro- 
ducers evaluated in this study, when compared to opera- 
tions in other major gold producing countries, is the tenden- 
cy for the operations to be combinations of surface and 
underground mines. For example, of the seven primary gold 
producing operations evaluated for costs in this study, two 
are 100-pct surface mining operations, two are 100-pct 
underground operations, and three are combinations of 
underground and surface mining operations. The two opera- 
tions with 100 pet of their production by underground 
methods are large operations with annual ore capacities of 
400.000 and 850.000 mt yr; however, their ore grades are 
low (in the 4- to 5-g mt range). The two operations with 100 
pet of their production from surface mining methods con- 
sist of a conventional bench mining operation with annual 
ore capacity close to 500,000 mt yr at a gold grade of over 
7 g mt. and a dredging operation that treats tailings from 
a prior milling operation at a rate of about 3.5 million mt yr 
for a grade of slightly over 1 g mt. The three operations 
utilizing a combination of surface and underground methods 
are fairly small, with total ore milling capacities ranging 
from 100.000 to 230,000 mt yr and overall weighted-average 
mill feed grades of 4.7 to io.8 g mt. 10 

Of the five operations with at least some underground 
mining, two are using sublevel stoping methods, one uses 
a combination of cut-and-fill and shrinkage stoping, one uses 
an overhead stoping method, and one utilizes cut-and-fill 
with mill tailings. As of 1982-83, hoisting depths at the 
Australian gold mines were relatively shallow, ranging 
from 120 m to more than 1,300 m. Daily ore capacities 
ranged from 120 to 2,800 mt d with 5 to 15 pet waste rock 
also being hoisted. Stoping heights for the nonsublevel 
stoping operations ranged from 1.8 to 3.0 m, while the 
sublevel stoping operations were dealing with stope heights 
of 3 to 10 m on average. Estimated underground mining 
productivities (including supervision) range from 4 to 15 mt 
per worker-shift. Estimated underground mining costs 
range from $15 mt - $20 mt to $50/mt - $60 mt. Labor costs 
are the single most important item in the estimated mining 
costs, representing 47 to 65 pet of the total. 

It is difficult to categorize the major surface mining 
operations producing gold in Australia. As of 1981-82, an- 
nual ore capacities of the evaluated surface mines showed 
a wide range from 18,000 to 480,000 mt/yr, with waste-to- 
ore ratios ranging from zero to 40 mt waste per ton of ore. 
The larger pits are generally planned to bottom at a depth 
of 60 to 120 m. These depths presently appear to be the limit 
of any of the producing or planned surface gold mines in 
Australia. Most of the mining of overburden and ore in 
Australia is done by contractors since most of the surface 
mining operations begin with short projected mine lives and 
the reserves necessary to recoup major investments in min- 
ing equipment are not present. This situation, combined 
with relatively small capacities, fairly lengthy ore haulage 
distances to mills, and the somewhat remote locations of 
the operations, results in surface mining costs that are 
significantly higher ($1.50/mt to $1.90/mt material moved) 
then those at major U.S. surface gold mines. Direct labor 
costs are estimated to account for 25 to 35 pet of the total 
operating cost for the Australian surface mines evaluated 
in detail in this study. 



10 Underground ores grade 5.0 to 13 6 g mt. while surface ores grade from 
1.5 to 6.0 g mt. Trie proportions of surface and underground material range 
from 90 pet underground and 10 pet surface to 82 pet underground and 38 
pet surface. 



METALLURGICAL METHODS AND 
OPERATING COSTS 

Of the seven major primary gold operations evaluated, 
six are treating primary ore and one treats reclaimed tail- 
ings from a prior sulfide flotation operation. 

The nine types of ore at these seven operations are 
treated in six mills. Two of these mills are using the carbon- 
in-pulp method of extracting gold from the solutions pro- 
duced by cyanide leaching, while four use the conventional 
Merrill-Crowe method of extracting the gold from leach solu- 
tions. All of the mills treating primary ore contain a gravi- 
ty separation-amalgamation circuit in closed circuit with 
their grinding stage to recover the coarse free gold in their 
ores, which is estimated to range from at least 10 pet to as 
much as 50 pet of total gold at individual operations. 

Of the nine basic ore types involved, two are refractory 
ores and require roasting of flotation concentrates followed 
by cyanide leaching of the calcine resulting from roasting. 
Two other ore types are primary sulfide ores requiring pro- 
duction of a flotation concentrate which is then leached with 
a cyanide solution. The remaining ore types include two 
completely oxidized ores, two that are classified as "primary 
ores," and one consisting of sulfidic tailings. The operations 
that treat refractory ores are interesting in that they con- 
duct a cyanide leach on the flotation concentrates prior to 
roasting and then use a second cyanide leach of the calcine 
after roasting of the concentrates. One of these operations 
then goes on to include a third cyanide leach, this time 
leaching the tailings from flotation. 

Mill recoveries (total gold recovery) when treating 
nonrefractory, primary ores are high, ranging from 90 to 
97 pet. The best recovery is at operations treating oxidized 
ore with high free gold content. Recoveries when treating 
refractory ores are lower, in the range of 83 to 90 pet. The 
recovery for the tailings retreatment operation is very low 
at 40 to 45 pet, basically reflecting the sulfidic nature of 
the original ore and the low grade of the tailings. A low 
recovery of only 83 pet is also indicated at one of the opera- 
tions which treats a clayey, sulfide ore along with two dif- 
ferent primary gold ores. The product of all of these mills 
is in the form of dore bullion, which is produced by smelting 
the various gold-containing precipitates (steel wool with 
electrowinning, "sponge gold" from retorting of amalgams, 
and zinc dust precipitate from the Merrill-Crowe process) 
with fluxes. These dore bullions are cast into bars or but- 
tons in the 800- to 1,200-tr-oz range. The dore bullion from 
the operations analyzed ranges from 55 pet gold and 35 pet 
silver to 92 pet gold and 4.5 pet silver, the remainder is com- 
posed of base metals such as copper, lead, zinc, and iron. 
All of the dore bullion from the major operations was as- 
sumed to be transported by airfreight to one of the two ma- 
jor gold refineries in Australia. These refineries are located 
at Perth in Western Australia and at Melbourne in Victoria 
Province. 

For the mills treating primary, nonrefractory ores, 
estimated operating costs (including smelting to dore 
bullion) range from about $9/mt to $19/mt ore treated. The 
lower cost operations (below $15/mt) reflect higher tonnage 
operations (above 200,000 mt/yr). Generally, those opera- 
tions treating refractory ores incur additional costs in the 
range of $3/mt to $5/mt which represent mainly the addi- 
tional costs of flotation and roasting. It must be 
remembered, however, that this is simply a general trend 
noticed from comparison of the operations involved in this 
study. It is difficult to generalize about costs in the 



72 



Australian gold mining industry, especially when including 
costs in the administrative and general categories, since 
these categories reflect a variety of circumstances from 
relative remoteness, to physical layout of the operations, 
to company policy. 

A few final points should be made regarding gold 
metallurgy in Australia. First, there were no large-scale 
heap leaching operations in Australia as of the 1983-84 
period, although there were several small heap leaching 
operations with maximum capacity in the 20,000- to 
30,000-tr-oz/yr range. Second, the operating costs developed 
in this study apply only to the larger scale milling opera- 
tions (above 150,000 mt/yr ore feed) which are using vat 
leaching techniques. Third, several of the major gold mills 
in Australia evaluated in this study set aside some portion 
of their capacity for custom milling of ores from small pro- 
ducers in the vicinity of the mill. 



REFINING AND TRANSPORTATION 

As of 1981, four primary gold refineries were accepting 
gold bullion in Australia: one in Victoria Province, one in 
Western Australia, and two in New South Wales. The 
refinery in Victoria is located near Melbourne and has an 
estimated capacity to produce 160,000 tr oz refined gold and 
320,000 tr oz refined silver per year. The refinery in 



Western Australia is operated by the Perth Mint and is 
located in the city of Perth. It has an annual capacity to 
refine about 600,000 tr oz gold and 65,000 tr oz silver. In 
New South Wales, Matthey Garrett Pty. Ltd. has a refinery 
at Kogarah capable of producing 320,000 tr oz/yr gold and 
640,000 tr oz/yr silver. The fourth gold refinery accepting 
bullion was Broken Hill Associated Smelting Pty. Ltd.'s 
Port Pirie complex in South Australia, which has the 
capability to produce 6,500 tr oz refined gold and 900,000 
tr oz refined silver per year, mostly from its own lead con- 
centrates. A fifth (nonprimary) gold refining facility is 
located at Port Kembla in New South Wales, where Elec- 
trolytic Refining and Smelting Co., Ltd., produces about 
65,000 tr oz gold and 450,000 tr oz silver per year from treat- 
ment of anode slimes resulting from copper refining. 

The above capacities are circa 1981-82 and represent 
a total capacity to produce around 1.2 million tr oz refined 
gold and 2.4 million tr oz refined silver per year. The ma- 
jority of the major, primary gold producers evaluated in this 
study send their bullion to the Perth Mint's refinery in 
Western Australia. A Government organization, the Gold 
Producer's Association (GPA), handles the insurance, refin- 
ing, and marketing of gold bullion being sent to the Perth 
Mint. Although the GPA takes responsibility for shipment 
of the bullion from the mine site to the Perth Mint, the 
transport charge is paid directly by the mines. It appears 
that as of 1984, Australia's total capacity for gold refining 
was being pressured by increasing mine production levels. 



BRAZIL 



HISTORICAL PERSPECTIVE 



Beginning in the late 17th century and continuing in- 
to the late 18th century, Brazil was the largest producer 
of gold in the world. Mohide (4, p. 129) reports an estimated 
production from 1691 through 1780 of about 24 million tr 
oz with 9.4 million tr oz being produced during 1741-60. 
Most of the production during the 18th century came from 
placer deposits in the southern part of the country (fig. 37). 
With placer production beginning to decline in the late 18th 
century, the Morro Velho Mine in Minas Gerais was 
developed in 1834. Since that time, this mining operation 
has represented the basic core of Brazil's reported 
(registered) gold production up to the late 1970's. Also dur- 
ing this same time period, Brazilian gold production has 
been consistently eclipsed by discoveries and developments 
in the United States, Australia, South Africa and Canada, 
so that as of the mid-to-late 1970's, Brazil was the 11th to 
13th ranked largest producer in the world, as shown in table 
62. 

Several developments since the late 1970's have re- 
quired a reexamination of Brazil's position in the world gold 
mining industry. As shown in table 62, estimates of Brazil's 
gold production show a tremendous fourfold increase be- 
tween 1979 and 1980 with the higher levels of production 
continuing through 1984. This increase in production has 
elevated Brazil into the ranks of the top six producers in 
the world, following South Africa, the Soviet Union, and 
Canada, and close behind or essentially equal to the Peo- 
ple's Republic of China and the United States. The inter- 
related factors that have caused or reflect this increase in 
Brazilian gold production are believed to be — 

1. The increased U.S. dollar price of gold. 



2. Increased access to the Amazon Basin region through 
improved infrastructure and modes of transport (e.g., 
helicopters). 

3. The discovery of the Serra Pelada gold deposit. 

4. Improved cruzeiro payment terms for Government 
purchases of gold output by small miners in the Amazon 
Basin. 

5. Poor economic conditions leading to dislocation from 
normal industries. 

These five factors have had two major effects on 
estimates of gold production in Brazil. First, all five of these 
factors have been responsible for what is essentially a gold 
rush into the Amazon Basin. This gold rush is similar in 
many ways to those in past world history, but it involves 
a geographic area of much greater size. Second, the fourth 
factor, improved cruzeiro payment terms by the Brazilian 
Government, has succeeded in attracting more of the out- 
Table 62. — Estimated Brazilian gold production and 
world ranking, 1975-84 

Voar Total production, 1 World 
_ 1Q3 tr oz ranking 

1975 172 13 

1976 240 12 

1977 280 11 

1978 301 11 

1979 320 11 

1980 1,300 4 

1981 1,200 6 

1982 1,500 8 

1983 1,600 6 

1984 2 2,120 4_ 

'Compiled from U.S. Bureau of Mines Minerals Yearbooks (20): 1976, 1980, 
1982. All figures differ substantially from those appearing in latest available 
official Brazilian sources due to the inclusion of estimates for unreported pro- 
duction by small-scale operations (garimpeiros). Officially reported figures for 
major mines in 10 3 tr oz follow: 1978-129; 1979-107; 1980-131 (revised); 
1981-415. 

Estimated (47, p. 2). 



73 



■■- — -- i hhmm ' mm i », tP » « 




LEGEND 



• City or town 

-^— ^ Areas <rf Precombnon shield 
^^ exposures 

f*^ Areas of post production 



Morro Velho Operations 
@ Jocobina 
@ S*rro Pelada 



500 



Scoit.u* 



Figure 37. — Selected major nonalluvlal gold mining 
operations and areas of primary gold deposits In Brazil. 



put from workings in the Amazon Basin into the category 
of "registered" gold production, rather than being smug- 
gled out of the country or not reported, as was prevalent 
in the past. This has led to higher reported production 
figures. According to the Finance Ministry of Brazil, so- 
called clandestine gold mining operations have dropped 
from 83 pet of total Brazilian production in 1979 to 30 pet 
in 1983 <48 p. 281). 

Some idea of the size and intensity of this Amazon Basin 
gold rush can be obtained by noting that the Serra Pelada 
deposit was discovered in February 1980. By September 
1981. it was estimated that 50,000 garimpeiros (individual 
minersi were working Serra Pelada at its highest level of 
activity '49. p. 24 ». In a recent article in the Wall Street 
Journal, it was stated that 250,000 garimpeiros were 
operating in the entire Amazon Basin area, up from 97,000 
3 yr earlier (.50, p. 33). 

SOURCES OF PRODUCTION AND 
PRODUCTION COSTS 

Brazilian gold production for 1983 has been cited by 
several sources as 1.51 million tr oz, an increase of about 
84 pet over 1982 production of about 803,000 tr oz. Expec- 
tations for 1984 were that 2.12 million tr oz would be pro 



duced (48, p. 281); however, the latest available figures in- 
dicate that gold production for 1984 will be slightly less than 
expectations at about 2.025 million tr oz (50, p. 33). Fully 
85 pet of 1984 production will represent production from 
garimpeiros, with the remaining 15 pet being produced by 
organized companies. By comparison, in 1982 around 66 pet 
came from garimpeiro operations, while 34 pet came from 
organized mining companies. Thus, basically all of the in- 
crease in Brazilian gold production since 1982 has come 
from garimpeiro operations. 

Table 63 categorizes the major sources of 1984 Brazilian 
gold production according to which operations are organized 
and which are not and also as to which are underground, 
hardrock operations and which are alluvial-eluvial-fluvial 
operations. As shown, only two primary gold operations, 
Morro Velho and Jacobina, are organized, company-run 
underground, hard rock operations and they account for on- 
ly 209,000 tr oz (10 pet) of expected 1984 production. Less 
than 1 pet (16,000 tr oz) is produced from surface and 
underground copper operations conducted by Caraiba 
Metais. The remaining 1.895 million tr oz, or 89 pet, is pro- 
duced from alluvial-eluvial-fluvial operations, 95 pet of 
which is produced by garimpeiro operations. 

Because so much of Brazil's gold production represents 
small, nonmechanized production by tens of thousands of 
garimpeiros mining alluvial-eluvial-fluvial gold deposits, 



74 



Table 63. — Expected 1984 Brazilian gold production, by operation and type of mining 1 



Expected 1984 production 
mt 10 3 tr oz 



Type of mining 



Company operations: 

Morro Velho 

Jacobina 

Paranapanema 

Dragagem Fluvial 

Caraiba Metais 

Other companies 

Subtotal 

Garimpeiro operations: 

Tapajos River 

Cumaru River 

Mato Grosso State 

Rio Madeira 

Gajas State 

Belero area 

Serra Pelada 

Amazonas State 

Maranhao State 

Roraine River 

Amapa State 

Others 

Subtotal 

Grand total 

1 Compiled from various sources and the authors' own estimates. 



5.0 
1.5 
1.0 

.6 
.5 

1.4 



161 
48 
32 

19 
16 

45 



10.0 


321 


15.0 


482 


10.0 


322 


10.0 


322 


5.0 


161 


4.5 


145 


3.5 


113 


3.0 


97 


1.4 


45 


1.0 


32 


.6 


19 


.5 


16 


1.5 


48 


56.0 


1,802 



66.0 



2,120 



Hard rock (underground). 

Do. 
Alluvial-eluvial-fluvial 
surface). 
Do. 
Byproduct-hardrock 

(surface-underground). 
Unknown. 
NAp. 

Alluvial-eluvial-fluvial 
(surface). 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 

Do. 
Unknown. 
NAp. 
NAp. 



it is impossible to analyze the majority of Brazil's gold pro- 
duction as to development schedules and production costs. 
Production levels vary greatly at these types of operations, 
and production costs in the normal sense of the term are 
meaningless. Therefore, an availability analysis that at- 
tempts to relate an expected total or annual level of gold 
production in Brazil to a long-term total production cost can 
address only about 10 pet of Brazil's 1983-84 production. 

It is not possible to predict annual production, much less 
total potential availability, from the garimpeiros' opera- 
tions. The long-term production cost of gold at these opera- 
tions is essentially zero because the gold is produced in a 
more or less subsistence economy (i.e., no alternative form 
of employment) by semimechanized or manual methods in- 
volving very low-cost capital equipment such as motors to 
pump water and gravel. Some operations do use heavier 
equipment such as front-end loaders and trucks; this 
"mechanized" mining is technically illegal, according to the 
Government, but will probably increase in the future. The 
only cost that the Government incurs for that portion of the 
garimpeiros' production that is purchased is the marginal 
cost of printing new cruzeiros, which is also essentially zero. 
From a long-term availability perspective, the chief concern 
is that this high-grade, small-scale mining by the 
garimpeiros may render many deposits uneconomic to later 
mechanized mining, thus rendering some portion of the 
ultimate gold potential of the Amazon unavailable. 

The Morro Velho underground mine and the Serra 
Pelada surface operation are estimated to contain approx- 
imately 10 million tr oz total gold. Morro Velho is an 
economic gold producer at a gold price of $400/tr oz. Based 
upon this study's estimate of demonstrated resources and 
current output levels, Morro Velho is expected to produce 
past the turn of the century. 

The Serra Pelada operation, currently being mined by 
tens of thousands of garimpeiros, was evaluated as if it were 
operated as a large-scale, mechanized surface mine. The 
analysis under this scenario determined a long-term total 
production cost of less than $100/tr oz. The Government of 
Brazil has expressed a desire to convert Serra Pelada to a 
large-scale, mechanized operation run as a company 



endeavor, but has not pursued this option owing to the prob- 
lem of having to deal with tens of thousands of displaced 
garimpeiros. 

POSSIBLE NEW SOURCES OF PRODUCTION 
BEYOND 1984 

With the spectacular increases in gold production that 
have occurred so far during the 1980's in Brazil, it is natural 
to speculate on how much higher Brazil's annual produc- 
tion level could go. As can be seen from the widely varying 
estimates of table 64, this is a difficult question to answer. 
This table presents different estimates of future Brazilian 
gold production to 1990 and the "best" estimates of actual 
gold production for 1980-84. 

The 1980 Brazilian Government estimate of expected 
production in 1984 of 5.048 million tr oz has proven to be 
much too optimistic; estimated actual production was 2.12 
million tr oz. It is difficult to say how much of the shortfall 
from the expectations of 1980 was due to the nonimplemen- 
tation of the plans that the estimate was based upon, and 
how much was due to operational or economic factors. A 
comparison of the 1980 estimates with actual results should 
make one cautious about the two circa 1983-84 estimates 
of possible production levels in 1990. As shown, the 
Brazilian Government has mentioned a goal of producing 
nearly 13 million tr oz/yr by 1990 which would probably 
make Brazil the second largest gold producing country in 
the world, depending upon which estimate for the Soviet 
Union is used. The estimate for the same period by Mining 
Journal Research Services is much more conservative at 
an expected production of slightly more than 4 million tr 
oz/yr by 1990 and is probably more realistic since it only 
reflects a doubling in gold production between 1984 and 
1990. Even this lower estimate of gold production would 
still make Brazil the third-ranked gold producing country 
in the world, behind only South Africa and the Soviet 
Union. For the near term, the Gold Institute predicts total 
Brazilian production of 2.581 million tr oz in 1985, a 22-pct 
increase over estimated 1984 production. 



75 



Table 64. — Varying estimates of actual and potential Brazilian gold production in selected years, thousand troy 

ounces 



Year 



Best estimates of 


Brazilian Government 


Gold Institute 


Other 


Actual production 




bsii mare 


13DU 




estimates 3 


estimates 




1980' 






1984* 


1.300 


NA 






NA 


NA 


NA 


1.200 


1.929 






NA 


NA 


NA 


803 


2.874 






NA 


NA 


NA 


1,510 


3.958 






NA 


NA 


4 1,607 


2.120 


5,048 






NA 


1,920 


4 2,250 


NA 


16.075 






NA 


2,581 


NA 


NA 


NA 






NA 


2.581 


NA 


NA 


NA 






NA 


NA 


NA 


NA 


NA 






NA 


NA 


NA 


NA 


NA 






NA 


NA 


NA 


NA 


NA 






12.860 


NA 


54,038 



1980 

1981 
1982 
1983 
1984 
1965 
1986 
1987 
1988 
1989 
1990 



NA Not available 

'Reference 51. p 55 Based upon expectations from a proposed plan to organize and control alluvial gold mining throughout Brazil; still not im- 
plemented as of 1984 
'Official Brazilian Government goal as of 1984 (47. pp 2-3) 
'Reference 2. 
'Reference 52. p 79 
5Re'erence 3 



The question remains whether proposed expansions to 
existing 1984 producers plus additional production from 
undeveloped deposits can support either of the estimates 
of 1990 production shown in table 64. To answer the ques- 
tion, one should look at three distinct categories of Brazilian 
gold operations and deposits: 

1. 1984 producers with production that can be accurate- 
ly monitored, represented by the Morro Velho, Jacobina, 
Serra Pelada. and Caraibas Metais operations. 

2. Deposits not in production as of 1984 with published 
grades or expected production levels. 

3. 1984 alluvial-eluvial-fluvial producing operations, 
with 95 pet of the production representing garimpeiro opera- 
tions and 5 pet representing company operations. 

At the four 1984 producers where production amounts 
can be accurately monitored, the only announced expansion 
plans are for the Morro Velho and Jacobina operations, 
which are expected to increase production to the 390,000-tr- 
ozyr level by 1988. an increase in annual capacity of 
191.000 tr oz over 1984's level. No long-term expansion 
plans have been announced for either Serra Pelada or 
Caraibas Metais" operations. 

A review of the literature as of 1982-84 resulted in a 
list of 11 prospective gold mining operations in Brazil where 
the expected annual production capacity can be roughly 
estimated. The list includes four individual alluvial opera- 
tions planned by companies, six prospective primary, hard 
rock gold mining operations, and one porphyry copper 
deposit. The four alluvial operations should have produc- 
tive capacities ranging from 3,000 to 25,000 tr oz/yr with 
an average size of about 10,000 tr oz/yr. The six primary, 
hard rock operations would probably have production 
capacities ranging from 12,500 to 150,000 tr oz/yr, with an 
average of 60,000 tr oz/yr. The porphyry copper deposit is 
reported to have gold grades sufficient to enable the opera 
tion to produce 95,000 to 130,000 tr oz/yr. Thus, these 11 
prospective gold producers would probably be capable of pro- 
ducing 495,000 to 530,000 tr oz of additional gold annually 
if all were brought on-stream. 

Additional gold production capacity from the expansion- 
at Morro Velho and Jacobina and development of the 11 
deposits mentioned in the previous paragraph would 
amount to 686,000 to 721,000 tr oz yr. If 1984 total produc- 
tion of around 2.1 million tr oz is maintained, annual pro 
duction by 1990, without any additional production from 
garimpeiro operations, would total 2.8 million tr oz. This 
would be 1.2 million tr oz less than the more conservative 



estimate shown in table 64 and nowhere near the higher 
estimate of nearly 13 million tr oz/yr by the Brazilian 
Government. 

It is possible to propose various scenarios for additional 
production from other sources to bring the proposed produc- 
tion level up to 4 million tr oz/yr. The development of 44 
additional deposits, comparable in size to those listed 
previously, would add about 1.4 million tr oz of annual 
capacity. Likewise, a 75-pct increase in 1984 garimpeiro pro- 
duction would add about 1.3 million tr oz of annual gold 
production. Thus, it appears that a level of production of 
4 million oz/yr by the early 1990s in Brazil is not 
unreasonable to expect; however, a level of 13 million oz 
of annual production appears to be impossible to achieve 
without an extraordinary amount of new development 
within the next 6 yr. 



RESERVES AND RESOURCES 

In 1980, Companhia de Pesquisa de Recursos Minerals 
(CPRM), the Brazilian Government's mineral exploration 
company, estimated that there were 33,592 mt (1.08 billion 
tr oz) of contained gold in reserves of all types of ore, primary 
and secondary. This estimate of 1.08 billion tr oz of contain- 
ed gold is important since the value is about 40 pet higher 
than this study's estimation of contained gold in South 
Africa's demonstrated resource. The 1.08-billion-tr-oz 
reserve is actually a resource total and was reported (In- 
different ways in the U.S. Embassy report (53, p. 2) from 
which the following descriptions were taken. 

First, in terms of geographic location, CPRM reported 
that 0.421 billion tr oz are located in north' 
0.223 billion tr oz are located in the Amazonia region, 0.207 
billion tr oz are located in the southeast area. 0.205 billion 
tr oz are in the central-western region, and 024 billion 
tr oz are in the southern area. 

The resources were also split by CPRM into a pri n i 
portion, which represent B inil Ial mining and milling of ore. 
and a secondary portion, which n p ind 

crushed rock. CPRM categorized 69 . r > pel (0.76 billion tl oz) 
of the resource as primary material and 30.6 pel (0.33 billion 
tr oz) as secondary material 

The third way that CPRM described Brai iree 

estimate is the most important categorization in ten 
normal methods of describing reserves and n thii 



76 



categorization, CPRM described the 1.08 billion tr oz of 
primary and secondary gold resource as comprised of 0.023 
billion tr oz of known reserves, 0.101 billion tr oz of 
geological reserves, and 0.956 billion tr oz of potential 
reserves. 

It is not known why, but these values estimated by 
CPRM differ somewhat from data in CPRM's February 1980 
booklet entitled "The Situation of Gold in Brazil" (54). In 
this publication CPRM places preliminary gold reserve 
estimates at a total of 0.744 billion tr oz of which 0.024 
billion was in the defined reserve category, 0.192 billion 
was in a geological reserve category, and 0.528 billion was 
in a potential reserve category. There is no contradiction 
between the known reserve amount in the first set of 
estimates described and the defined reserve amount in the 
second set of estimates. It is only in the nebulous categories 
of "geological reserve" and "potential reserve" that the two 
estimates vary greatly. This discrepancy is understandable 
given that the geological reserve category is an estimate 



based on mathematical calculations from maps and aerial 
photos, while the potential reserve estimate involves an 
even higher level of uncertainty. 

The defined reserve figure of 23 million tr oz of "known" 
gold reserve as of 1980 is as conservative as the 0.744 to 
1.08-billion-tr-oz potential reserve estimate is liberal. It is 
probable that this official known reserve figure does not ful- 
ly reflect new discoveries in 1980-83 and also does not 
reflect the nonorganized operations that, as already noted, 
accounted for over 85 pet of 1984 production. 

The above resource estimates should be compared with 
the estimates of future production mentioned earlier. If the 
lower estimate for early 1990's annual production of 4 
million tr oz is achieved (table 64) and maintained to the 
end of the century, at least 55 million tr oz of gold will have 
to be produced in 1984-99. Likewise, if the higher level of 
production of 13 million tr oz/yr by the early 1990's is 
achieved and maintained, between 150 and 175 million tr 
oz of gold will have to be produced in 1984-99. 



U.S.S.R. 



HISTORICAL PERSPECTIVE, 1754-1983 

Major production of gold in the U.S.S.R. (then Russia) 
may have begun about 1754. An indication of this comes 
from a translation of a speech given by R. DeBatz in 
Atlantic City in February 1898. In the translation, DeBatz 
cites total gold production in Russia from 1754 through 1895 
as 59.194 million tr oz distributed geographically as shown 
in table 65 (55, p. 452). 

As shown in the table, the bulk of the production up to 
1895 had come from Siberia and from the Ural Region. Ac- 
cording to DeBatz, in the 1840's, prior to the discoveries 
in California and Australia, gold production in Russia 
amounted to 40 pet of total world production, which would 
indicate a production level of about 700,000 tr oz/yr. By 
1896, Russian production had risen to about 1.53 million 
tr oz/yr, yet it only represented about 14.5 pet of world pro- 
duction because of the discoveries in the United States, 
Australia and South Africa (55, p. 453). By 1914, Russian 
gold production had further increased to about 1.73 million 
tr oz/yr but represented only 6 pet of total world gold pro- 
duction (56, p. 275). 

In the 5-yr period from 1915 to 1920, World War I and 
the Communist revolution resulted in a drastic decline to 
a production level of only about 100,000 to 200,000 tr oz/yr 
1919-22. The gold mining industry became a state monopo- 
ly in 1920 and in 1923 began a slow rise toward its former 
production levels. However, it was not until 1932, with pro- 
duction of 1.8 million tr oz, and 1933, with production of 
1.9 million tr oz, that the level of gold production finally 
surpassed the previous peak reached in 1914-15 (56). 

Stalin announced in 1933 that production of gold in the 
Soviet Union could be easily quadrupled in a few years, in- 
dicating a target level of about 7 million tr oz, and, from 
1932 through 1936 annual gold production increased to 
about 5.3 million tr oz, or 15.5 of total world production. 
Since 1936, all data on gold production in the Soviet Union 
have been treated as a state secret. At this time, total 
cumulative gold production in the Soviet Union from 1754 



Table 65. — Gold production in Russia, 1754-1895, by 
geographic area 



Production 10 3 tr oz 1 



13 

16,249 

3,760 

39,172 

59,194 



Area 

Russia Proper (Finland and the Caucasus) 

The Ural Region 

Western Siberia 

Eastern Siberia 

Total 

bounded from original estimates (55, p. 452). 



through 1935 approximated 100 to 110 million tr oz. 
However, from 1936 through the present, all gold produc- 
tion values for the Soviet Union have been estimated by 
Western experts and have varied tremendously, as will be 
shown. Depending upon which set of estimates is used, total 
cumulative Soviet gold production from 1935 through 1983 
ranges from 300 to 400 million tr oz, for a grand total of 
anywhere from 400 to 500 million tr oz of cumulative gold 
production from 1754 through 1983. 

Table 66 lists various estimates of Soviet gold produc- 
tion for 1970 and 1973-83; these estimates range from 5 
million tr oz/yr to 13.5 million tr oz/yr. The Bureau of Mines 
estimates are the most conservative but also the most con- 
sistent. Beginning in 1981, the range of estimates appears 
to narrow to between 8.4 and 11 million tr oz/yr. This is 
very close to 9 to 11.25 million tr oz/yr estimated by Con- 
solidated Gold Fields for 1980, which is probably a revision 
of the original 1974 estimates by Dowie and Kaser. 

If the Bureau's estimate of 5.03 million tr oz for 1965 
is accepted, and if the Gold Institute's estimate of 9.5 million 
tr oz for 1982 is correct, then the claim that the Soviet gold 
mining industry has undergone a revitalization, beginning 
with the eighth 5-yr plan of 1966-70 and continuing to the 
present, is valid (58, p. 6). As previous discussions have 
shown, revitalizations of gold production have occurred in 
Australia, Canada, the United States, and Brazil since the 
mid-1970's. Thus, it is possible that the Soviet Union has 
responded to increasing prices with higher production levels 
despite the general difference in the economic system. 



77 



Table 66. — Varying estimates of gold production in the Soviet Union for selected years (all estimates rounded to 

million troy ounces) 



Year 


Dowie and 


Consolidated 


Mohide 


Kaser 


CIA 


Bureau of 


Gold 


Kaser (57) 


Gold Fields 


(4) 


(61) 


(61) 


Mines (20) 


Institute (2) 


■9~: 


11.0 


NA 


NA 


8.5 


7.0 


6.5 


NA 


1973 


120 


'5.0 


NA 


NA 


NA 


7.1 


NA 


1974 


135 


NA 


NA 


NA 


NA 


7.3 


NA 


1975 




212.9 


7.7 


NA 


NA 


7.5 


NA 


1976 


NA 


NA 


7.9 


NA 


NA 


7.7 


NA 


1977 


NA 


NA 


8.0 


NA 


NA 


7.8 


NA 


I97B 


NA 


NA 


8.0 


NA 


NA 


8.0 


NA 


•9~9 


NA 


NA 


8.4 


NA 


NA 


8.1 


NA 


1980 




S9.0-11.2S 


NA 


NA 


NA 


8.3 


NA 


1981 


NA 


NA 


NA 


11.0 


105 


84 


96 


1982 


NA 


NA 


NA 


NA 


NA 


NA 


9.5 


1983 


NA 


NA 


NA 


NA 


NA 


NA 


9.1 



NA Not available 

'Reference 58 Estimated prior to the completion of the study by Dowie and Kaser. 

^Reference 59. 

Reference 60. 



Table 67.— Summary of 1970 operational data for Soviet 
gold operations from Dowie and Kaser's 1974 study {57) 



Average size. 
10 3 mt/yr' 



Number of 
operations 



Recovery grade, 
g/mt 



Small dredge 
Washing plant 2 
Large dredge 
Power shovel 
Underground placer 



500 

1 70-340 

2.000 

1.700 

250 



763 

52 

47 



0.15 

.07 
1 84 



'Converted from cubic meters using a tonnage factor of 1.7 mt/m 3 . 
includes gravel pump, monitor, bulldozer, and sluicing operations 

SOVIET GOLD PRODUCTION 
BY DEPOSIT TYPE 

The most important source of gold production in the 
Soviet Union in the 1970's and early 1980's has been pro- 
duction from primary placer gold mines. Primary lode gold 
mines have been the next most important source, and 
byproduct gold production from copper, lead, and zinc opera- 
tions represents the least important source. 

The most informative study of Soviet gold production 
available to the authors of this study is that done in 1974 
by Dowie and Kaser for Consolidated Goldfields Ltd. (57). 
The original study concentrated on estimates based on cir- 
ca 1970 data. It is believed that this study was updated and 
enhanced in 1980 or 1981, but the details of the update, if 
done, are not available to the authors. Dowie and Kaser 
estimated that production in 1970 totaled 11.0 million tr 
oz. Of the total. 54 pet was estimated to be from placer pro- 
duction. 34 pet was from lode gold mines, and 12 pet 
estimated to come from byproduct production, with 75 pet 
of the byproduct gold production coming from copper opera- 
tions in the Urals. A summary of historical production by 
deposit type follows. 

Placer Production 

Of total Russian production from 1754 through 1895, 
72.5 pet had come from Eastern and Western Siberia. The 
overwhelming majority of this production had come from 
placer deposits with vein deposits worked very little and 
always on a small scale. Very few dredges had been operated 
in Siberia before 1900, none with any success. It is believed 
that nonmechanized placer production practices continued 
until the late 1920's or early 1930s. This is supported by 
data in an article in Engineering Mining Journal of June 
1935 <56> which contains estimates that in 1913 only 20 pet 



of total Soviet gold production was mechanized and in 1925 
mechanized production was still only 25 pet. By 1933, ful- 
ly 70 pet of production was mechanized, representing mainly 
the large-scale introduction of dredging and power shovel 
equipment (56, p. 278). 

As of the early 1980's, placer production is probably still 
the most important source of gold, although its relative im- 
portance has declined with the increase in primary lode gold 
production since 1965-66. 

Table 67 summarizes some of the operational data as 
estimated by Dowie and Kaser for their study. The number 
of operations of each type are Dowie's estimates as of 1970, 
and it is likely that equipment put on-line since then is of 
larger size. Dowie estimates that as of 1970 the waste-to- 
ore ratio at surface placers ranged from 1:1 to 5:1 with an 
average of about 2:1. To Dowie, the 5:1 stripping ratio ap- 
peared to be the maximum allowable before reverting to 
underground placer mining. 

The grades of the placer operations, as estimated by 
Dowie and Kaser, are also shown in table 67. With an 
overall estimated production of 6 million tr oz from 1.07 
billion mt placer feed material, the overall recoverable gold 
grade is about 0.17 g/mt feed material. These grades ap- 
pear low when compared to Western operations at a similar 
time. In fact, Dowie and Kaser mention thai the apparent 
grades for their estimates could be influenced by the 
methodology itself, especially on the low side. However, they 
also state (57, p. 13) that the derived estimates did agree 
with reported national totals. They further state (57, p 14), 
with validity, that there is very little direct evident oi 
Soviet placer grades. 

The grades given in table 67 of 0.07 g/mt for large 
dredges, 0.15 g/mt for small dredges and washing plants, 
and 1.84 g/mt for underground placers in the Soviet Union 
can he compared with the data in table 68, which shows 
typical grades a1 elected Western placer operation 

tated for this study. As shown, the three major Western 



78 



Table 68. — Placer grades at various evaluated operations in market economy countries 



Country 

or State Status 

Bolivia Dredge, producer 

California . . do 

Dozers and floating 
plant, nonproducer 
Colombia . . do 



Operational data 



Size, 
10 6 mt/yr 



Recoverable 
grade, g/mt 



3.45 

6.4 

3.7-4.7 

30.0 



0.09-0.16 

.10 

.30-. 60 

.06 



Table 69. — Important lode gold mining developments in the Soviet Union 



Province 



Deposit or mine 



Start 
production 



Gold production capacity, 
1 3 tr oz/yr 



Uzbekistan 1 



Armenia . 
Yakutia* . 



Magadan 



Zarafshan Mining Complex 

(Muruntau). 

Armzloto (Zod Pass) 

Nizhynyi Kuranakh Mining 

Complex. 

Dukut Lode 

Karakem Lode 

Nugodzer Mountains 



1971 

1971 
1966-70 

1980 

Unknown 
Unknown 



2,600 

320 

NA 

NA 

NA 
NA 



NA Not available. 

'Mill capacity of 50,000 mt/d to produce 50 to 60 mt/yr gold as reported by Cieslewicz (58, p. 8). 

2 Reported to be the largest gold mill in the world as of the early 1970's in terms of ore feed (58, p. 7). 



dredging operations herein evaluated were treating 
material with grades of 0.06 to 0.16 g/mt as of the early 
1980's with a weighted-average grade of 0.07 g/mt. 
Interestingly, this is the same grade as Dowie and Kaser 
estimated in their 1970 study for large Soviet dredging 
operations. There are no Western operations in this analysis 
that would be comparable to the small dredge, washing 
plant, or underground placer operations in the Soviet Union; 
thus, a comparison of relative grades cannot be made. It 
is certain, however, that the (circa 1970) grades of 0.15 g/mt 
for the small dredges and washing plants and 1.84 g/mt for 
the underground placer operations in the Soviet Union 
would be uneconomic at U.S., Canadian, or Australian wage 
and energy costs and with gold prices below $400/tr oz. 

Lode Production 

This is the category of Soviet gold production that is 
believed to have shown the greatest increase since 1965-66. 
However, this was also the category that showed the widest 
variation in Dowie and Kaser's 1970 production estimates. 
Their best estimate of production was 3.8 million tr oz, while 
their possible estimate was 6.4 million tr oz. Based on the 
few published estimates of production capacity at selected 
primary lode gold deposits in the Soviet Union, it appears 
that current (1980's) primary lode gold production is closer 
to the 6.4-million-tr-oz estimate. 

Table 69 summarizes pertinent data on the most impor- 
tant lode gold developments in the Soviet Union since 
1965-66. As shown, only two of the lode gold operations 
have had production estimates assigned to them, the Zaraf- 
shan (Muruntau) complex in Uzbekistan and the Zod Pass 
operation in Armenia. The latest estimates of annual pro- 
duction are 2.6 million tr oz and 320,000 tr oz, respective- 
ly, for a total of 2.92 million tr oz (60). These estimates are 
questionable, however, since another (58) has indicated that 
the design capacity at the Zarafshan complex as of 1977 
was for only 800,000 tr oz/yr production. The milling com- 
plex at Nizhynyi Kuranakh was reported to be the largest 
gold mill in the world as of the early 1970's, this at a time 
when the Zarafshan gold mill was being brought on-stream 



at an indicated ore capacity of 50,000 mt/d as cited in the 
same source. The Zarafshan and Nizhynyi Kuranakh mill- 
ing operations are both treating what has been classified 
as low-grade ore from large open pit operations. In fact, if 
the ore capacity and gold production values from 
Ciezlewicz's article (58) are correct, then the indicated 
recoverable grade at the Zarafshan operation was only 
about 2.8 g/mt ore feed and the Nizhynyi Kuranakh 
recoverable grade would probably be even lower. It appears 
that both mining operations are run more like a typical 
large-scale Western copper mine than a typical Western 
gold mine. The Zod Pass Mine is an underground mine in 
which it was planned to rail the ore 50 km to the mill, a 
possible indication of fairly high gold grades. 

If it is assumed that the Nizhynyi Kuranakh milling 
complex is producing in the vicinity of 1 million tr oz (40 
pet of Zarafshan's production), then these three operations 
(Nizhynyi Kuranakh, Zarafshan, and Zod Pass) account for 
nearly 4 million tr oz annual gold production. There could 
also be production from an unknown but possibly large 
number of other lode gold mines. 

Byproduct Gold Production 

Dowie and Kaser gave their best estimate of byproduct 
gold production for 1970 as 1.3 million tr oz/yr with a possi- 
ble estimate of 1.8 million tr oz/yr (57). New estimates of 
byproduct gold production from copper and lead-zinc opera- 
tions in the Soviet Union for 1977 and 1978 are reported 
to be 1.9 million and 2.0 million tr oz/yr, respectively, (60, 
p. 64). In 1977, 73 pet of this byproduct gold production came 
from copper ores and 24 pet came from lead-zinc ores. Also 
of interest is the estimate that in 1977, 97 pet of byproduct 
gold production from copper ores came from 13 mining 
operations while 94 pet of gold production from lead-zinc 
ores also came from 13 mining operations. 

RESERVES AND RESOURCES 

Even more enigmatic than Soviet gold production 
estimates are estimates of gold reserves and resources. Ac- 



79 



cording to the Mining Annual Review for 1974, potential 
reserves of gold in ore and placer deposits in the Soviet 
Union were estimated at about 200 million tr oz in 1970 
with measured reserves sufficient for 16 to 17 yr of opera- 
tion at the current (1970) production rate (62, p. 438). In 
1977, potential reserves were again reported to be 200 
million tr oz with measured reserves sufficient for 12 to 15 
yr of operation at current (1977) production rates (63). 

At the other extreme is an assessment, reported in an 
article on Siberia in Optima magazine, that "there is far 
more gold in the ground in Russia than in South Africa with 
economically mineable amounts estimated to be between 
125,000 and 156.000 tons (4.02 to 5.02 billion ounces)" (64, 
p. 971 

Given that the Soviet Union comprises about one-eighth 
of the entire land mass of the world and the lack of infor- 
mation available to make assessments, this very wide range 
of between 200 million and 4 to 5 billion tr oz is probably 
the best guess that can be made about in situ gold reserves 
and resources in the Soviet Union. It should be noted, 
however, that at an estimated 1983 production level of 9.1 
million tr oz yr. it would take 439 yr to mine out 4 billion 
tr oz of in situ gold resources. 



Table 70. — Estimates of annual Soviet gold sales, 
1 966-83 1 

Estimated sales, 
Year 10 6 tr oz 

1 966 Negligible 

1967 1.1 

1968 8 

1969 Negligible 

1970 Negligible 

1971 2.2 

1972 6.8 

1973 9.0 

1974 9.3 

1975 8.1 

1976 6.5 

1977 12.9 

1978 13.2 

1979 7.4 

1980 2.6 

1981 9.7 

1982 6.4 

1983 2.9 

Total 98.9 

'1966-74 from Mohide (4, p. 116). 1975-83 compiled from various issues 
of Mining Journal. Estimates in the table use the higher estimate of any range 
estimates. Estimates in the table are converted from metric tons and rounded 
to the nearest hundred thousand ounces. 



ISSUES CONCERNING SOVIET GOLD 
PRODUCTION 

The immediate question for the Western World to ask 
regarding the Soviet gold industry is how much of a factor 
this one nation, having produced 400 to 500 million tr oz 
in the past and with a present production capacity in the 
range of 8.5 to 11.5 million tr ozyr, can have on the world's 
gold market as it presently exists. Pertinent issues regard- 
ing this question are — 

1. Can the Soviet Union overtake South Africa in terms 
of annual production? 

2. How much refined gold does the Soviet Union 
presently have in aboveground reserves? 

3. What has been the pattern of gold sales since the late 
1960's'' 

4. If the Soviet Union does overtake South Africa as 
the world's largest gold producer, what would such an event 
mean? 

This study will not attempt to address these issues com- 
pletely: however, some perspective on all of the points can 
be given 

First, given that the real price of gold remains between 
$400 tr oz and $500 tr oz in 1984 U.S. dollar terms, South 
African gold production should follow the trend outlined in 
this study, which indicates that the first or second decades 
of the next century could see a very large decline in South 
African production from its present level of 21 million tr 
ozyr. It is considered likely, given past estimates, that 
Soviet production will be between 5 and 15 million tr oz/yr 
at that time. Most of the circa 1980 estimates of produc- 
tion capacity suggest that, at most, the Soviet Union has 
probably only doubled its annual gold production since 1936. 
In fact, the Soviets have twice, in 1933 and again in the 



early 1970's, boasted that they would exceed South African 
production levels and have failed both times. It is ques- 
tionable, therefore, whether they can accomplish this task, 
without a drastic decline in South African production. Their 
failure to accomplish this task during the 1970's, when 
South African production was decreasing at an average rate 
of 1 million tr oz/yr and at least 200 new gold deposits were 
being discovered in the Soviet Union, raises these doubts. 
Thus, it is not expected that the Soviet Union will overtake 
South African gold production until the dwindling of Wit- 
watersrand Basin production occurs. 

As to the second and third issues, most estimates of 
aboveground gold reserves in the Soviet Union as of the late 
1970's ranged from 1,800 to 2,700 mt (58 to 87 million tr 
oz) with some estimates as high as 4,000 to 5,000 mt (129 
to 160 million tr oz) (4, p. 121). This compares with estimated 
total Western gold reserves of approximately 3.0 billion tr 
oz and with official International Monetary Fund gold 
reserves, as of mid-1984, of over 900 million tr oz (65). The 
Soviet Union's estimated aboveground reserve of 58 to 160 
million tr oz compares with estimates of annual Soviet gold 
sales that have ranged from negligible amounts to over 13 
million tr oz from 1966 through 1983, as shown in table 70. 

Finally, what would it mean if the Soviet Union became 
the largest gold producer in the world in the first or second 
decade of the next century? First, it would probably mean 
that South African production had fallen below a level of 
10 to 15 million tr oz/yr and, most likely, that total world 
production had fallen proportionately from the levels of the 
early 1980's. Second, by the first or second decade of the 
next century, cumulative world gold production will prob- 
ably have reached about 5 billion tr oz. With so much 
overhang on the world market, it is not likely that one coun- 
try's annual production of 10 to 15 million tr oz would be 
a significant factor in the overall market. 



80 



OTHER IMPORTANT GOLD PRODUCING COUNTRIES 



Table 6 summarizes 1983 production by categorizing the 
countries as either major, important, or minor producers. 
The six "major" nations that this study has discussed in 
detail (table 6) represented 84 pet of 1983 world production. 
Ten other countries had sufficient production to be classified 
as "important" producers. These 10 nations accounted for 
an additional 13 pet of 1983 world production. The remain- 
ing 3 pet is accounted for by 40 "minor" countries. This sec- 
tion discusses the 10 important producing countries in some 
detail, and then presents a brief discussion of possible new 
gold property developments in countries considered minor 
producers. 

One of the 10 important countries, the People's Republic 
of China, produced 1.9 million tr oz gold in 1983. The other 
nine countries in this category had 1983 annual production 
levels ranging from 166,000 to 817,000 tr oz, or an average 
of 428,000 tr oz per country. The 40 countries in the minor 
category in total accounted for 1.9 million tr oz of gold pro- 
duction in 1983, an average of only 47,000 tr oz per country. 

Table 71 summarizes annual production for the 10 im- 
portant countries for 1975-83, with projected data for 1984. 
As shown, annual production from these countries increased 
by 2.6 million tr oz from 1975 through 1983. However, 70 
pet of this increase is due to major upward revisions to rough 
estimates of annual production in the People's Republic of 
China, and these estimates may still be questionable. The 
other nine countries increased their combined output by on- 
ly 774,000 tr oz between 1975 and 1983, or about 86,000 
tr oz per country on average. Preliminary estimates for 1984 
indicate that overall production for these nine countries 
should remain effectively the same. 

Since so little information is available on gold produc- 
tion in the People's Republic of China, no further discus- 
sion of this country will be made. The remainder of this sec- 
tion will present brief discussions of important aspects of 
gold production in the other nine free world countries 
categorized as important producers. 



THE PHILIPPINES 

The Philippines has increased gold production by 
315,000 tr oz (63 pet) from 1975 through 1983. Roughly two- 
thirds of total production is represented by byproduct pro- 
duction from primary copper mines. In 1982, 5 major min- 
ing companies with 10 primary copper mines accounted for 
effectively 100 pet of total byproduct gold production. Pro- 
duction of gold from primary gold operations is similarly 
concentrated in a small number of companies. Over 87 pet 
of total primary gold production came from just four min- 
ing companies with nine separate mines. At least 200,000 
tr oz of the 315,000-tr-oz increase in production since 1975 
can be accounted for by the development of the Masbate 
and Masara/Mapula primary gold operations and the Dizon 
copper project. Two major primary gold projects, the 
Paracale project and the Siana project, were expected to be 
in production by 1983, with annual outputs of 50,000 and 
30,000 tr oz, respectively, although reported total Philip- 
pine production does not seem to reflect such an increase. 

There are at least 12 potential copper operations in the 
Philippines that are well explored and well studied that 
could produce appreciable amounts of byproduct gold. The 
byproduct gold grades at these deposits are relatively good 
at 0.4 to 0.7 g/mt, but the copper grades at these potential 



projects are low at 0.4 to 0.54 pet Cu. If all 12 projects were 
brought into production, they could account for around 
300,000 to 350,000 tr oz of additional annual gold produc- 
tion; however, their development is questionable at this 
time. As far as is known, all 12 of these developments had 
been deferred as of 1983-84. 

This study evaluated three primary gold operations to 
determine demonstrated resources and production costs. 
The three operations are the Benguet operations (Antamok- 
Acupan-Atok-Kelly-Thanksgiving Mines), the Masbate 
operation, and the Paracale project. Total demonstrated 
resources for these three properties are estimated at 4.1 
million tr oz (contained gold) as of 1984. Total recoverable 
gold is estimated at 3.5 million tr oz, with most of this total 
represented by the Benguet Consolidated operations. Long- 
run total production costs for two of the operations are in 
the $200/tr oz to $260/tr oz range, while the other opera- 
tion has estimated total costs exceeding $475/tr oz. Average 
annual production rates for these three operations range 
from 50,000 to 120,000 tr oz. Current demonstrated 
resources are sufficient for Benquet Consolidated to produce 
past the turn of the century. The other two operations are 
estimated to have remaining productive lives of between 
8 and 12 yr. 

The Philippines does not appear at this time to have 
the ability to become a major gold producer. It is expected 
that future gold production potential will remain dependent 
upon the economics of copper production, which has con- 
tinued to represent a majority of total (byproduct) gold 
production. 



PAPUA NEW GUINEA (PNG) 

In 1982, 98.5 pet of PNG's total gold production was 
byproduct production from the Bougainville copper mine. 
PNG's gold production has trended steadily upward from 
a recent low in 1980, although production in 1984 is 
estimated to have fallen slightly. 

Future gold production is expected to increase substan- 
tially with the beginning of production at the Ok Tedi 
copper-gold project since May 1984. The first phase of this 
project entails the mining of a leached cap of gold ore that 
overlies the porphyry copper deposit. This cap is reported 
to contain approximately 3.1 million tr oz gold (66, p. 332). 
Ok Tedi is expected to produce, on average, around 600,000 
tr oz/yr gold during this initial phase in which it will essen- 
tially be a primary gold mine. This will increase PNG's total 
gold output noticeably, but these high levels of production 
will not be maintained beyond about 6 yr, which is the 
estimated life of the gold cap. Beginning probably in 
1989-90, Ok Tedi will process copper ore only with a small 
amount of byproduct gold production. 

Two of PNG's prospective gold producers are the 
Porgera and Misima Island primary gold prospects. The 
Porgera gold prospect is reported to contain 6.7 million tr 
oz gold (67, p. 144) and Misima Island 1.3 million tr oz (68, 
p. 23). Currently, neither prospect is under development, 
but exploration is ongoing. Thus, the near-term expectation 
is that PNG's total gold output will rise sharply due to Ok 
Tedi's initial production and then decline after the initial 
phase of primary gold mining at Ok Tedi is completed. 
Thereafter, it is expected that PNG production will remain 
at 500,000 to 700,000 tr oz/yr and be almost completely 



Table 71. — Annual gold production in 10 important gold producing countries, 
1975-83, thousand troy ounces 1 



81 



China Philippines 



Papua 
New Guinea 



Chile Zimbabwe Colombia 



Dominican 
Republic 



Ghana Peru Mexico 



Total 



1975 


50 


502 


611 


129 


500 


308 


195 


524 


101 


145 


3,065 


1976 


80 


501 


668 


129 


387 


300 


413 


532 


121 


163 


3,294 


1977 


100 


559 


740 


116 


402 


263 


343 


481 


104 


213 


3,321 


1978 


150 


587 


751 


102 


399 


257 


343 


402 


113 


202 


3,306 


1979 


200 


535 


630 


111 


388 


269 


353 


357 


124 


190 


3,207 


-95: 


225 


644 


452 


220 


368 


510 


370 


353 


142 


196 


3,480 


1981 


1.700 


758 


540 


400 


371 


535 


408 


341 


162 


203 


5,418 


1982 


1,800 


835 


564 


543 


426 


481 


380 


331 


158 


196 


5,714 


1983 


• 900 
21.900 


817 
2780 


582 
2577 


571 
J553 


430 
2 430 


429 
2439 


348 
2339 


303 
2320 


166 
170 


223 
2216 


5,754 


1984 testimated) 


5,724 



'Sources Bureau of Mines (7. 20). except where noted 
*Source Gold Institute (2). 



dominated by byproduct output from Bougainville and Ok 
Tedi in the absence of other primary gold or copper mine 
developments in the 1990's. 



CHILE 

Chile has shown a large increase in annual gold pro- 
duction, from 129.000 tr oz in 1975 to 571.000 tr oz in 1983. 
A recent article by Crozier (69) contains a detailed 
breakdown of gold production for the years 1976 and 1982, 
which has been summarized in table 72. As shown in the 
table, gold output increased fourfold from 1976 through 
1982. Of this overall increase in annual gold output of ap- 
proximately 410.000 tr oz. 89 pet came from primary gold 
mines, 10 pet came from increased byproduct production 
from copper mines, and only 1 pet came from primary silver 
mines. 

Table 72.— Breakdown of 1076 and 1082 gold 

production in Chile, by category of mining operation, 

troy ounces 



Type Of operation 



1976 



1982 



Pnmary gold mines 
Medium size 
Small sze 
Subtotal 

CoppM — BS 
Codelco 

Medium sze 
Small s ze 
•otai 

Sttvef tr 

Medium s ze 
Small size 
Scrotal 
Lead and zinc mines 

Total 



32,119 
26,653 


404.032 
17.821 


58,772 


421.853 


34.781 
16.200 

17812 


38.716 
49.358 
23.139 


68,793 


111.213 


1.607 



4,931 
778 


1.607 



5.709 
4.794 



129.172 



543.569 



Source Reference 69 



It is important to note that almost 100 pet of the increase 
in primary gold production came from the "medium sized' 
category and that about 350,000 tr oz (94 pet) of this total 
increase came from the El Indio pnmary gold mine. El In- 
dio began producing in 1980 and for the first few years was 



producing from very high grade ore. Beginning in 1985, the 
El Indio Mine is expected to produce at an average annual 
rate of around 140,000 tr oz, mining ore of much lower grade 
than in the first few years of production. Current 
demonstrated resources are sufficient for production to con- 
tinue at El Indio until the mid-to-late 1990's. Long-term 
total production costs are estimated to be under $300/tr oz. 
Over the last 3 to 4 yr, there has been much explora- 
tion for primary gold deposits along the coastal mountain 
range north and south of La Serena, at the Sancarron Pros- 
pect in the vicinity of the El Indio Mine, north of the El 
Indio Mine (the El Nevada Prospect), and in the Guanaco 
district in the State of Antofagasta. Based on the trend 
shown in table 72, it is expected that any major increase 
in Chilean gold production above the levels of 1983-84 will 
have to come from the development of additional primary 
gold deposits rather than from copper deposits, unless cop- 
per production from the medium-sized mines is increased 
dramatically. For example, CODELCO's annual byproduct 
gold production from its large copper operations increased 
by only 3,935 tr oz during 1976-82, which meant that ful- 
ly 78 pet of Chile's increased byproduct gold production from 
copper mining during this period came from the medium- 
sized mines rather than CODELCO's larger operations. 



ZIMBABWE 

It has been estimated that total historical gold produc- 
tion in Zimbabwe as of 1975 ranged from 65 to 70 million 
tr oz, which includes 20 to 25 million tr oz of ancient pro- 
duction (70, p. 47). During this period of ancient production, 
Zimbabwe "may have been the greatest gold field of the 
ancient world" (4, p. 137). 

Peak gold production in Zimbabwe since records have 
been kept occurred in 1945-64. During this period, Zim- 
babwe's reported gold production was fairly consistent at 
about 525,000 to 575,000 tr oz/yr, reaching the highest level 
during 1964 (20). Since that peak, gold production in Zim- 
babwe has shown a gradual but steady decline to a low of 
368,000 tr oz for 1980 (3). Since 1980, the decline has been 
reversed somewhat, with output rising to 430,000 tr oz for 
1983 (2), yet this is still below the 500,000- to 550,000-tr- 
oz/yr level of the late 1960's and early 1970's (20). 

For this study, 12 primary lode gold operations in Zim- 
babwe were evaluated. These 12 operations were all pro 
ducing in the 1981-82 period and should have accounted 
for a total of around 270,000 tr oz, or 63 pet, of gold produc- 



82 



tion in 1982. The following points can be made about these 
12 operations, which reflect the gold mining industry in 
Zimbabwe as it is presently comprised: 

1. All of the lode gold producers studied are small, 
underground mines. The 12 operations had ore milling 
capacities, circa 1982, of 60,000 to 265,000 mt/yr and pro- 
duced 9,000 to 58,000 tr oz/yr gold. Respective averages 
were about 130,000 mt/yr ore milled to produce 22,000 tr 
oz/yr gold. 

2. The past production histories of many of these 12 
operations reflect sporadic periods of production, shutdown, 
and reopening. The longest period of continuous production 
observed at any of the 12 operations was 40 to 50 yr. 

3. As in Canada, the lode gold deposits usually contain 
a fair amount of free gold and are associated with sulfide 
minerals (usually pyrite and arsenopyrite). Thus, 8 of the 
12 milling operations contained gravity circuits, 6 of the 
mills had at least 1 flotation stage, and 2 of the mills re- 
quired roasting of concentrates. 

4. Mill recoveries are fairly low with a weighted- 
average gold recovery for the 12 operations of only 84 pet. 
Again, this reflects the fairly complex nature of the 
minerology of typical lode ores in Zimbabwe. 

5. The grades of typical ores as of 1982-83 are relatively 
high, ranging from 3.3 to 12.8 g/mt. The weighted-average 
feed grade for all 12 operations was approximately 6.2 g/mt. 

6. At 10 of the 12 operations studied, the ore mineraliza- 
tion occurs as either pods, veins, bands, reefs, or lodes, which 
means that at least one dimension is small and mineraliza- 
tion can be erratic. Only 2 of the 12 operations had ore body 
dimensions that would allow large-scale, high-volume 
methods of mining to be practiced. For all 12 of the mining 
operations, the mining widths ranged from 1 to 7 m with 
an average of 3.4 m. 

7. Labor is the most important component of mining 
cost and is estimated to range from 44 to 68 pet of the total 
with an average of 57 pet. This percentage could increase 
since Zimbabwe has been experiencing a rapid increase in 
mining labor wage rates since independence in 1980. 

8. Milling costs are relatively high at $9/mt to $20/mt, 
with labor accounting for only 30 pet of the total milling 
cost, on average. 

9. Total recoverable gold at these 12 evaluated opera- 
tions is estimated at 3 million tr oz, with 37 pet of this total 
represented by the Renco Mine. 

10. Long-term total production costs range from $250/tr 
oz to $600/tr oz, although 70 pet of total recoverable gold 
is available below a break-even cost level of $400/tr oz. 

Since major lode gold operations in Zimbabwe average 
approximately 22,000 tr oz/yr production, about 20 new min- 
ing operations of comparable size would have to be 
developed to double 1984's estimated annual production 
capacity. Although much of Zimbabwe has a geologic en- 
vironment that is conducive to the occurrence of lode gold 
deposits, the sporadic nature of the mineralization, the com- 
plex mineralogy of the ores, and present economic condi- 
tions all argue against a fast and large increase in annual 
gold production. 

COLOMBIA 

Total gold production in Columbia from 1570 through 
the early 1980's is conservatively estimated at 60 to 80 
million tr oz. This amount of total production means that 
Colombia is probably the sixth or seventh largest gold pro- 
ducing country throughout history. It should be noted that 



the estimate does not include production for most of the 16th 
century or production prior to the coming of the Spaniards 
in the early 16th century. 

During the 20th century, the peak year for annual pro- 
duction of gold in Columbia occurred in 1981 when 535,000 
tr oz was produced. However, in terms of a sustained high 
level of annual production, 1944-63 appears to have been 
the peak period. During these 20 yr, annual production in 
Colombia ranged from 325,000 to about 460,000 tr oz, with 
an average annual output of 406,000 tr oz. The ensuing 
years of 1964 through 1972 saw a steady decline in annual 
gold production from 365,000 tr oz for 1964 to only around 
175,000 tr oz for both 1971 and 1972, a decline of over 50 
pet. With the freeing of the price of gold in 1971-72, a re- 
bound in Colombian gold production occurred, from 175,000 
tr oz in 1972 to 308,000 tr oz in 1975 (20). Since that time, 
Colombia's gold production has fluctuated from a low of 
257,000 tr oz in 1978 to a high of 535,000 tr oz in 1981 (table 
73). 

Colombia's annual production (like Brazil's) more rapid- 
ly reflects the effects of the varying price of gold. For ex- 
ample, the average price of gold fell 30 pet in 1981-83, and 
Colombia's gold production dropped 24 pet. The reason for 
this heightened sensitivity of production to the price of gold 
lies in the makeup of the gold operations. A majority of total 
gold production comes from small, alluvial gravity opera- 
tions with little equipment; these operations are usually 
family-run, and can be brought into production quickly or 
shut down immediately as the price of gold varies. 

Table 73 places the distribution of gold production in 
Colombia, as of 1981-82, into perspective. As shown, An- 
tioquia Province accounted for 70 pet and Choco Province 
accounted for 20 pet of total gold production during this 
period. These two provinces have historically accounted for 
the vast majority of Columbian gold production. In 1981, 
only three operations (two dredging and one lode mining) 
were producing more than 20,000 tr oz/yr. These three 
operations were estimated to account for 115,000 tr oz (21.5 
pet) of the total 535,000 tr oz that was produced in 1981. 
The small operations mentioned in table 73 are really very 
small. The average size small producer in Antioquia Prov- 
ince in 1981 was only producing an estimated 1,675 tr oz/yr 
gold, while those in Choco Province were estimated to be 
producing only about 570 tr oz/yr gold. Yet, combined, these 
small operations represented 78.5 pet of 1981 production. 



Table 73. — Estimated distribution of 1981 Colombian 
gold production, by province and size of operations 



Province and 


1981 production, 


size of category 


10 3 tr oz 


Description of operations 


Antioquia Province: 






Major producers 


65 


1 dredging operation, 
1 lode mining operation. 


Minor producers 


310 


185 small producers, 
average size = 1,675 tr oz/yr. 


Total (70 pet) 


375 


NAp. 


Choco Province: 






Major producers. . . . 


50 


1 dredging operation. 


Minor producers. . . . 


57 


100 small producers, 







average size = 570 tr oz/yr. 


Total (20 pet) 


107 




Other Provinces (10 pet) 


53 


NAp. 


Total 


535 


NAp. 



NAp Not applicable. 



83 



In 1982. one of the major dredging operations shown in 
table 73 was shut down; however, a new dredging opera- 
tion in Antioquia Province was supposed to begin produc- 
tion in late 1982 at slightly more than 30.000 tr oz yr. The 
major lode gold mining operation appeared as of 1981 to 
be in decline, in terms of both production and reserves, with 
indications that it would be hard-pressed to remain in pro- 
duction past 1985. It has been reported that an old lode mine 
uhe Marmato Mine* may be reopened by 1986 (71, p. 433h 
however, the reported production capacity would only be 
20,000 to 25,000 tr oz yr gold. No other major developments 
have been announced in the last few years; thus, it is felt 
that the immediate future of gold production in Colombia 
still lies with the small operations. If this is the case, then 
it may take another major increase in the gold price before 
there are significant increases in annual gold production. 

DOMINICAN REPUBLIC 

Annual gold production (table 71) in the Dominican 
Republic increased from 195.000 tr oz in 1975 to 413,000 
tr oz in 1976 and has remained in a range of 343,000 to 
408.000 tr oz yr since 1976. The Dominican Republic's gold 
production represents output from only one mining opera- 
tion, the Pueblo Vie.io Mine of Rosario Dominicana, S.A.. 
which started production during 1975 and did not reach full 
capacity until 1976. This operation is estimated to have 
total production costs over its remaining life of well below 
$200 tr oz. which places it among the 10 lowest cost pro- 
ducers that were evaluated in this world study. 

Since the start of production, the Pueblo Viejo opera- 
tion has been processing oxide ore only, and the cost 
estimates derived for this study reflect only the processing 
of oxide ore. Present oxide reserves should last until 1991 
at current production; however, sometime in 1985 or 1986 
a decision will have to be made as to whether to attempt 
processing the underlying sulfide ores, which could add 30 
to 36 yr of additional life to the operation. The sulfide ore 
is lower grade than the oxide ore and will require a revised 
mill with higher processing costs and or lower recoveries. 
Thus, gold production in the Dominican Republic will prob- 
ably remain in the range of 300,000 to 415,000 tr oz through 
the year 1990, with any projection beyond that date depen- 
dent upon the decision reached regarding treatment of the 
sulfide resources and the results of ongoing exploration for 
additional oxide ore zones. 

GHANA 

Ghana, the former Gold Coast colony of Britain, prob- 
ably contributed a significant portion of the gold output 
from the African continent prior to 1492, with the vast ma- 
jority of this production coming from small alluvial opera- 
tions. The first major mining of gold by European interests 
began in 1878-82 with development of the banket (bedd- 
ed' gold deposits at Tarkwa. Production from the lens gold 
deposits of Prestea first began in 1890, and production from 
the lens deposits at Ashanti began in 1897. These three 
primary gold deposits have formed the core of Ghana's pro- 
duction since 1900 and have produced continuously except 
during 1939-45. A fourth major primary gold producing 
operation in Ghana is the dredging operation in the 
Dunkwa alluvial goldfield. 

No major primary gold producing operations have been 
developed in Ghana since 1938 <4, p. 140). Gold production 



Table 74. — Gold production in Ghcna, 1964, 1980-81, 

and 1983, by major producing entities, 1 thousand 

troy ounces 



1964 



1980-81 



1983 



471 
374 


312 
98 


229 
50 


845 
+ 20 


410 

+ 15 


279 

+ 24 



303 



Ashanti 

5 state-owned operations 

Subtotal 

Difference from reported 
total production 

Total reported production . . 865 425 

'Compiled from various issues of the Bureau of Mines Minerals 
Yearbook and other sources. 



in Ghana reached its highest level in 1963 with production 
of 921,555 tr oz (20) at an indicated recoverable grade of 
33 g/mt. Since 1963, a steady decline in gold production has 
occurred, to 614,000 tr oz for 1974 and to 303,000 tr oz for 
1983, a drop of over 66 pet since the peak production year 
of 1963. Ghanian officials were estimating in 1979-80 that 
as much as $36 million worth of gold was being smuggled 
out of the country each year (4, p. 140), this represents at 
least 100,000 tr oz/yr additional gold production, which 
probably does not show up in reported production amounts. 

With the achievement of independence in 1960, the Gha- 
nian Government established a state-owned corporation, the 
Ghana State Mining Corporation, as a holding company for 
the five gold mines operating in the early 1960's: 
Amalgamated Banket Areas, Arista, Ghana Main Reef, Bi- 
biani, and Bremary Gold Dredging. By 1964, there were 
only two privately owned gold mining operations in Ghana, 
the Ashanti operation and the small Konongo Mine. As of 
1979-80, there was only one gold mining operation with 
partial (45 pet) private ownership, the remainder being con- 
trolled by the State Gold Mining Corporation. 

For the year ending June 1981, production at Ashanti 
was about 290,000 tr oz, while total production at Tarkwa 
and Prestea was about 86,000 tr oz for combined output from 
all three operations of 376,000 tr oz. Production from the 
other two state-owned gold operations (the underground 
Konongo Mine and the Dunkwa dredging operations) was 
probably similar to 1976 production with output of 3,200 
and 9,600 tr oz, respectively, bringing total output for the 
period to 388,000 tr oz/yr. 

Table 74 compares estimates of production from Ashanti 
and from the five major operations of the State Gold Min 
ing Corporation with total country production for 1964, 
1980-81, and 1983. Actual comparison of production values 
is difficult because of differing financial years, resulting in 
the entry entitled "difference from reported total produc- 
tion" on the table and the apparent discrepancy in yearly 
production figures cited in the text. As shown, even though 
Ashanti's production had fallen by 242,000 tr oz (51 pet), 
from 1964 through 1983, its percentage of total gold pro- 
duction in Ghana has actually increased from 54.5 pet in 
1964 to an indicated 75 pet in 1983. 

The 1983 gold production figures show an industry in 
disarray. Production at the state-owned operations has 
fallen nearly 50 pet in just 3 yr, while production at Ashanti 
has fallen by 27 pet. This decline has alarmed the Govern- 
ment sufficiently so that in late 1983 and early 1984 it took 
several steps in an attempt to return production to levels 
comparable to those of the early 1960's (900,000 tr oz/yr). 
The changes instituted so far are a 90-pct devaluation of 



84 



the Ghanian currency (the cedi) in October 1983, the grant- 
ing of the right for a corporation to retain 20 pet of its ex- 
port earnings, and allocation of the bulk of a recent IMF 
funding program to attract foreign investment. Goals of the 
program are to double production at Ashanti to about 
450,000 to 460,000 tr oz/yr by 1989 and to triple output at 
the state-owned mines to 150,000 tr oz/yr by mid-1987. A 
new shaft will be sunk at Ashanti and $25 million of new 
equipment will be purchased as part of its program, while 
operations at Tarkwa, Prestea, and Dunkwa will be 
rehabilitated beginning with an International Development 
Agency loan of $23.7 million (72, p. 212). 

Whether these plans can be achieved or not remains to 
be seen. There are many negative factors affecting the Gha- 
nian gold industry, among them the shortage of qualified 
personnel and the lack of financial capital. There is a great 
need for new investments at these very old mines that have 
been in operation anywhere from 91 to 106 yr and have ex- 
panded laterally to such an extent that new shafts and new, 
modern equipment are major priorities. The grades of the 
three major lode mines in Ghana are excellent, ranging 
from 5.8 to 12.5 g/mt, and there is good potential for addi- 
tional resources. Thus, there should be no reason, given an 
environment conducive to efficient operation, that these 
mines could not attain the goals set out above. 

This study attempted to determine current 
demonstrated gold resources and long-term total production 
costs at the Ashanti, Tarkwa, and Prestea gold mining 
operations. The results are an estimated 6 million tr oz of 
recoverable gold available from all three operations, with 
roughly two-thirds of this total recoverable gold represented 
by the Ashanti Mine. Extraction of this gold, as estimated 
in this study, is indicated to be very expensive at over $700/ 
tr oz. However, this estimate is based upon negative 
technologic and economic factors as of 1981-82 which could 
possibly be overcome by radical change. 



PERU 

Annual production of gold in Peru increased 64 pet be- 
tween 1975 and 1983, with virtually 100 pet of the increase 
coming from many small, primary gold producing opera- 
tions mining alluvial or lode deposits in the eastern half 
of the country. One source states that 10 pet of total 1981 
gold production in Peru came from three companies produc- 
ing from primary gold ores (73, p. 360). This would indicate 
average production at these three companies of about 5,230 
tr oz/yr, very small by world standards. There has been no 
information in the mining press about any large-scale 
primary gold operations being developed between 1975 and 
1981 in Peru. The largest planned primary gold mining 
operation appears to be a dredging operation, which would 
produce 16,000 tr oz/yr when brought into production (73, 
p. 360). Basically, at 170,000 tr oz/yr gold production and 
with a ranking as the 15th largest gold producer, Peru is 
not a significant factor in the world's gold industry. 



MEXICO 

Mexican gold production showed a moderate (78,000-tr-oz) 
increase from 145,000 tr oz in 1975 to 223,000 tr oz in 1983. 
In fact, the production values in table 71 show that the in- 
crease actually occurred between 1975 and 1977, with an- 
nual gold production in Mexico for 1982 and 1983 virtual- 



ly identical to that in 1977. During this period, the majori- 
ty of Mexican production has come from two smelting- 
refining complexes: the Torreon lead-zinc complex, which 
handles ores and concentrates from the major lead and 
silver mines, and the Cananea copper complex, which 
handles concentrates from the Cananea copper mine. It is 
estimated that in 1982 about 85 pet of total Mexican gold 
production came from these two smelting-refining com- 
plexes; the Torreon smelting-refining complex produced 
about 155,000 tr oz, and the Cananea complex produced 
about 12,000 tr oz. 

As of 1982, there was only one deposit in Mexico that 
could be classified as a primary gold deposit, and there were 
no primary gold producers. For example, of the 16 Mexican 
gold-silver properties initially investigated for this study, 
only 3 had gold grades high enough to be considered as 
primary gold mines, and the 2 producing operations in this 
group were actually primary silver mines. Thus, only 1 of 
the 16 properties (Pinzan Morado) is classified as a primary 
gold deposit, and it is still not in production as of 1984. 

Recent publications mention that trial production was 
begun in February and March 1984 at a new primary gold 
mine (El Barqueno) which was not evaluated for this study. 
One source (75, p. 25) mentions that this deposit plus 
another nearby deposit (Los Murillo) could increase Mex- 
ico's gold production by 24,000 to 48,000 tr oz for 1984 and 
could add 177,000 tr oz of additional production by 1987 
or 1988. To achieve this output from these two deposits 
would probably require an ore capacity of about 1 million 
mt/yr, which in turn indicates that reserves of 8 to 10 
million mt would be required. Current reserve estimates 
are below 8 million mt. It is fairly certain, though, that any 
major increase in Mexican gold production over the near 
term will have to come from deposits such as these two. 



POSSIBLE GOLD PROJECTS IN COUNTRIES 
NOT EVALUATED 

A review of the 1979-84 mining literature attempted 
to determine which of the many possible new gold mines 
that have been announced during this period would be of 
sufficient potential to have some effect on world mine pro- 
duction of gold. The list, presented in table 75, represents 
only those gold deposits that (1) were not in production as 
of 1982, (2) are not in any of the countries discussed in- 
Table 75. — Possible new gold mining developments of 
significance in countries not covered in the report 



Country and deposit name 



Estimated possible 

annual production, 

10 3 tr oz 



Algeria: Tiririne 

Czechoslovakia: Sedicany 

Fiji: Vatukoula JV (Emperor) 

Greece: Neo Khorion 

India: Chigarikunta 

Chittor District 

Indonesia: Lebong Tandai Area. . . 

Ivory Coast: Ity 

Japan: Hishikari 

New Zealand: Martha's Hill 

Saudi Arabia: Mahd Adh Dhahab. 
Suriname: East Suriname Project. 

Upper Volta: Poura 

Total 



30 
175 
40 
60 
20 
20 
30 
40 
115 
85 
75 
20 
75 
78 



85 



dividually in this report, (31 appear to have sufficient 
reserves to allow production of at least 20,000 tr oz yr gold, 
and (41 have resource values that appear to be reasonably 
well documented. As shown, only 13 deposits met the 
criteria above, although this undoubtedly is not an all- 
inclusive list. 

Four of these 13 possible operations are past producers 
that have been reevaluated in light of increased gold prices, 
and 1 is a deposit first reported on as early as 1971. Only 
8 of the 13 represent, as far as is known, totally new 
discoveries during the late 1970's and early 1980's. 



If all 13 were brought on-line, they would represent close 
to 800,000 tr oz of additional annual gold production with 
an average output of 60,000 tr oz/yr. However, 3 of the 13 
are low grade (less than 3.0 g/mt), raising questions about 
whether the price of gold as of 1984 is sufficient to allow 
development to proceed. Even if all 13 operations were 
developed, their output would only represent an increase 
of around 2 pet in annual world production. Thus, those 
countries that are currently insignificant contributors to 
world gold output are likely to remain insignificant, given 
what is being reported about their potential for expansion. 



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APPENDIX.— METHODOLOGY OF ANALYSIS 



The analyses performed for the purposes of this study 
involved geologic, engineering, and economic evaluations. 

The geologic aspects particular to each current or pro- 
posed gold mining operation included in the study were 
determined in order to develop estimates of demonstrated 
recoverable resources and weighted average mill feed 
grades. 1 Demonstrated resource tonnages are reported in 
metric tons and mill feed grades in grams per metric ton. 

An aggregate summarization of demonstrated resource 
tonnages, mill feed grades, and contained and recoverable 
gold in troy ounces is reported for each country. These 
estimates were developed on a property-by-property basis 
but are aggregated in order to preserve the confidentiality 
of some of the data. All resource estimates are as of January 
1984. 

The demonstrated resource level was employed for 
costing purposes in order to determine the relative economic 
position of each operation and each country evaluated. For 
the base case cost analyses, all cost and resource estimates 
were updated to January 1984. Mining and beneficiation 
methods and costs were developed according to actual or 
proposed development plans and associated production 
capacities, including all announced capacity expansions as 
of 1981-82. The estimates of mining and beneficiation 
operating costs are on a per ton of ore feed basis and are 
composed of three components: direct and indirect labor 
costs, equipment operation costs, and material and supplies 
cost. The operating cost estimates do not include allowances 
for capital recovery (depreciation), taxes, royalties, or 
reinvestments in plant and equipment. These costs are 
calculated and entered into the analyses separately. 



The engineering evaluation outlines the major mining 
and beneficiation methods, costs, and operating parameters. 
The countries are then ranked by resource level and degree 
of economic competitiveness, as measured by the estimates 
of mining and milling operating cost. Operating costs are 
estimated to reflect the cost of mining an entire 
demonstrated resource and include such factors as increas- 
ing underground haulage distance, mining depth, capaci- 
ty expansions at the mine and milling facilities, declining 
ore grade, etc. The cost estimates are long-run in nature 
and are generally higher than current operating costs. In 
addition, mine, mill, and infrastructural capital costs and 
development expenses are determined, and any exploita- 
tion or development problems that are significant in af- 
fecting gold availability are also addressed. Mine and mill 
plant and equipment reinvestments required over the mine 
life are also included in order to determine total capital 
costs. 

To determine the cost and quantity of refined gold of 
at least 99.6-pct purity that is potentially available from 
each property's demonstrated resources, the analyses were 
expanded to include, where applicable, gold dore refining 
and concentrate smelting and refining costs and gold dore 
and concentrate transportation, handling, and insurance 
costs. 

Lastly, all existing foreign country tax structures that 
relate to capital recovery and taxation of income were in- 
corporated into the analyses in order to perform a complete 
economic evaluation. 

The economic evaluation of each operation was per- 
formed using discounted cash flow rate of return (DCFROR) 



87 



techniques. The base case analyses consisted of two parts. 
In the first part, the long-run total cost of producing refined 
gold from each operation over its producing life was deter- 
mined. This cost is defined mathematically as a discounted 
cash flow unit (per ounce) cost and is herein referred to as 
the long-run total production cost or total cost. The long- 
run total cost equals the long-run U.S. dollar-denominated 
price per ounce at which gold must be sold, so that the pres- 
ent value of all revenues equals the present value of all 
costs, including a prespecified rate of return. 

For this study, rates of return of zero and 10 pet were 
specified when determining the long-run total cost of pro- 
duction over the life 2 of an operation. The first rate (zero 
percent^ is used to determine the break-even point, where 
revenues are sufficient to cover total investment and pro- 
duction costs over the operation's life but provide no positive 
rate of return. This is the undiscounted cost determination. 
This rate would reflect the investment parameters of a pro- 
ject given only market share or developmental concerns, 
where potential multiplier effects (i.e., social benefits) would 
offset company -operation-specific profitability. For privately 
owned enterprises or those not strictly developmental in 
nature nor Government owned, a more reasonable long- 
term economic decision-making parameter is that 
represented by the 10-pct DCFROR. This rate was con- 



sidered the minimum sufficient to maintain adequate long- 
term profitability and attract new capital to the industry. 
Within these two economic horizons lies the cost structure 
of the operations and countries in question. The second part 
of the economic evaluation determined long-run rates of 
return, given assumed constant 1984 gold prices (usually 
$400 and $500) and a discount factor of 10 pet. 

The availability of gold from an operation is presented 
in this study in two ways. First, gold availability is 
presented as a function of the long-run total production costs 
associated with it. Total availability curves are constructed 
as aggregations of all evaluated operations, ordered from 
those having the lowest total production costs to those hav- 
ing the highest. The potential total availability of gold can 
be seen by comparing the expected 1984 U.S. dollar market 
price to the total cost values shown on the availability 
curves. Second, annual availability curves for selected time 
periods are constructed that show the annual availability 
of gold at different cost-price levels. 

'Recoverable resource is defined as total mill feed tonnage and contained 
gold after allowances for mining recovery and dilution. 

The project life of each property evaluated was determined by assuming 
that the property would be operated at 100 pet of design capacity for pro- 
ducing operations, or for nonproducing operations, as determined according 
to the engineering development plan that was derived. The mine life covers 
only the demonstrated resource level. 



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